* Stock markets brace for earnings, await sales outlooks
* Some Asia earnings look better but getting revised lower
* U.S. dollar, Treasuries sought as stocks sink
* Alcoa CEO says sees signs of stability in US
By Kevin Plumberg
HONG KONG, April 8 (Reuters) - Asian stocks tumbled on
Wednesday and the U.S. dollar climbed, with investors bailing
out of recent positions and camping on the sidelines to await
company outlooks as what is expected to be a grim results
season begins.
Major European stocks were expected to open down as much as
1.8 percent, according to financial bookmakers, as the global
equity rally that began last month based on optimism about
policymaker efforts hit a wall.
Shares of banks, automakers and technology companies were
the main targets of selling in thinning volume, as the harsh
reality set in that earnings for the U.S. companies in the S&P
500 are expected to tumble 37 percent in the first quarter, the
seventh consecutive declining quarter, according to Thomson
Reuters.
Some Asian companies were expected to fare better this year
than many of their counterparts in other regions. For example,
U.S. earnings this year were forecast to shrink 4 percent
versus 1 percent in Hong Kong and 10 percent growth in South
Korea, according to global estimates tracker IBES.
Still, the overarching trend of downward earnings revisions
was firmly in place.
"I think round one of the rally may be over," said
Katsuhiko Kodama, a senior strategist at Toyo Securities in
Japan.
"We're also heading into the earnings season, and while it
has been predicted to be bad and you can say things are
factored in, it's different when you actually have those
figures before your eyes."
Japan's Nikkei share average <> fell 2.7 percent, led
by Canon Inc <7751.T> and Honda Motor Co <7267.T>. The index
was still 22 percent above its March 10 bear market low.
The business environment in Japan continued to deteriorate
in March despite climbing stock prices. Corporate bankruptcies
rose 14 percent from a year earlier, increasing for a 10th
straight month, research firm Tokyo Shoko Research said.
[]
The MSCI index of Asia Pacific shares outside Japan
<.MIAPJ0000PUS> was down 3.7 percent, after being repelled by a
major obstacle on technical charts for the third time on
Monday.
A 5.3 percent drop in shares of global lender HSBC
<0005.HK> was the biggest drag on Hong Kong's Hang Seng index
<>, which led the region with a 4.1 percent decline on the
day.
S&P 500 futures <SPc1> were down 1.2 percent, pointing to a
lower open, after aluminium producer Alcoa Inc <AA.N> kicked
off the U.S. earnings season by posting a second straight
quarterly decline. []
Klaus Kleinfeld, the company's chief executive, said in a
conference call with analysts the U.S. residential construction
market might be bottoming out and was hopeful government
stimulus action would revive demand for metals.
"In the U.S., we are seeing the first signs of markets
stabilising at lower levels," he said.
VOLATILITY UNDER CONTROL
Despite the shakeout in bullish positions in equities,
global financial markets appeared to be at an inflection point,
with volatility remaining contained and the pace of economic
decline appearing to slow across Asia.
The Chicago Board Options Exchange's volatility index, or
VIX <.VIX>, closed below its 200-day moving average for a third
day. The 20-day moving average of the VIX was on the verge of
dropping below the 200-day, signalling a shift to a downtrend.
For now investors have sought cover in the U.S. dollar and
yen until some corporate earnings visibility returns.
The euro fell 0.6 percent to $1.3185 <EUR=> and dropped
more than 1 percent to 131.55 yen <EURJPY=R>, after touching
137.42 yen on Monday, its highest since late October.
The dollar fell 0.7 percent to 99.80 yen <JPY=> after
rising to a near six-month high of 101.45 yen on Monday.
"The currency market moved back to risk aversion after
optimism had gone a bit too far," said Yoshihisa Kanzaki, a
currency dealer at Shinkin Central Bank.
U.S. light crude fell about a dollar or 1.8 percent toward
$48 a barrel on Wednesday <CLc1>, adding to Tuesday's 3.7
percent loss after weekly data showed U.S. crude inventories up
far more than expected and declining equities dented sentiment.
U.S. Treasuries extended gains from overnight as investors
sought a short-term refuge. The yield on the benchmark 10-year
yield <US10YT=RR> dipped to 2.87 percent from 2.90 percent on
Tuesday in New York.
Australian government bonds rose after a leading indicator
of employment fell for a 16th consecutive month in April,
causing dealers who had been unwinding yield curve flattening
trades to scramble to put them back on.
Japanese government bond futures turned lower after traders
hedged against a dose of new supply of 5-year bonds, with the
10-year future down 0.3 point <2JGBv1>.
