* Crude oil up $1 on storm threat to supply
* MSCI Asia ex-Japan stock index at 17-month low
* Energy sector sees $1 bln in redemptions in week - EPFR
By Kevin Plumberg
HONG KONG, Aug 18 (Reuters) - The U.S. dollar slipped on
Monday, easing from a six-month high against the euro as gold
and oil prices rose, but slowing demand for commodities was
widely seen supporting the currency in the medium term.
Reports in recent weeks have confirmed the euro zone and
Japanese economies are shrinking, prompting dealers to scale
back expectations for interest rate increases and emerging
markets investors to prepare for a potential backlash.
Asian stock markets were mixed, with shares outside Japan
<.MIAPJ0000PUS> hitting a 17-month low on a view that faltering
consumer demand in developed economies will likely hit exports
even harder. But Japan's Nikkei share average <> ended 1.1
percent higher as investors looked for bargains after a recent
market sell-off.
European stock markets <><><> were expected
to open slightly lower, according to financial spreadbetters,
with both the euro and oil prices rising.
Fears about a protracted global slowdown have caused oil
prices to reflect a much lower so-called demand premium, as top
consumers like China ratchet down energy imports.
On Monday, U.S. light crude prices climbed more than $1 to
$115 a barrel <CLc1> on threats to supply in the Gulf of Mexico
from a tropical storm.
Still, the overarching trend for lower commodity prices and
a stronger dollar remained firmly in place.
"Fresh weakness in European economic data and the easing
inflation threat given the sharp fall in oil prices had the
market shifting its focus to growth from inflation in recent
weeks," said Nizam Idris, currency strategist with UBS in
Singapore.
"This has helped the U.S. dollar, not due to any strong
U.S. macroeconomic data, but more due to the incremental
weakness in other major economies," Idris said in a note.
The MSCI index of Asia-Pacific stocks outside Japan fell
0.5 percent and has now tumbled 34 percent from a life high
last November.
Hong Kong's Hang Seng index <> fell 1.2 percent to a
five-month low after a profit warning from the world's biggest
contract manufacturer of cellular phones, Foxconn International
Holdings <2038.HK>, unleashed fears of more domestic weakness.
Foxconn shares plunged 19 percent on the news.
The Shanghai composite index <> fell 4 percent to a
19-month low, hurt by shares of coal producers after Beijing
raised export taxes on coal to curb power shortages.
EMERGING MARKETS AT RISK
The dollar was down 0.3 percent against the yen <JPY=> at
110.15 yen, after touching a seven-month high on Friday above
110.60 yen.
The euro rose 0.4 percent to $1.4750 <EUR=>, after posting
its fifth weekly loss against a resurgent U.S. dollar. Since
mid-July, when oil prices peaked, the euro has tumbled more
than 8 percent, on Friday hitting its lowest since February.
After crude's gains this year were cut by two thirds in the
past month, investors have slashed their exposure to the energy
sector and put money back into U.S. assets.
Last week, energy sector funds saw redemptions of more than
$1 billion, money flowed out of Middle East and Africa funds
for the first time this year and Brazil equity funds suffered
net outflows for a 10th consecutive week, according to EPFR
Global, a Boston-based firm that tracks $10 trillion in assets.
Asset-allocation strategists with JPMorgan said investors
should keep betting on government bonds and expect U.S. stocks
to outperform European equities in the current environment of
slowing global growth.
They also expect the U.S. dollar to continue strengthening
against the euro, Australian dollar and New Zealand dollar.
"Markets are sensing that global demand is weakening and
that economies outside the U.S. are bearing the brunt of this
weakness. Even emerging markets growth, which showed remarkable
resilience in the first half, is at risk of falling below
trend," the strategists said in a weekly note.
"We continue to position for the intensification of growth
weakness outside the U.S. through the currency markets."
The global slowdown has already penetrated Asia ex-Japan.
Hong Kong's economy is shrinking on a quarterly basis, data on
Friday showed, joining Singapore.
In the bond market, Japanese government bond futures rose
on expectations the Bank of Japan would keep rates on hold in
coming months with the economy possibly already in a recession.
At a two-day meeting starting on Monday, the BOJ is
expected to downgrade its view of the economy and keep interest
rates on hold at 0.5 percent. []
September futures <2JGBv1> rose 0.15 point to 137.84, in
sight of a four-month high of 138.12 hit last week.
The benchmark 10-year yield <JP10YTN=JBTC> edged down 1
basis point to 1.445 percent, near a four-month low of 1.415
percent touched last week.
Spot gold prices rose 1.8 percent to just above $800 an
ounce <XAU=> on the recovery in oil prices. The yellow metal
slumped more than 8 percent last week, its biggest drop since
1983, triggering a broad decline in metals prices.
(Editing by Dhara Ranasinghe)
