* Risk avoided at all costs; global recession seen deep
* Uncertainty over U.S. auto bailout, Citigroup
* MSCI world stock index down 12 pct this week
(Updates prices, adds government bond market)
By Kevin Plumberg
HONG KONG, Nov 21 (Reuters) - Waves of selling in world
stock markets crashed into Asia on Friday, with gains from the
region's 5-year bull run now erased as a global recession
tightened its grip, and investors sought refuge in government
bonds and cash.
U.S. stocks were at the lowest in more than a decade and
oil prices fell to 3-1/2-year lows, trading below $50 a barrel,
as commodity prices slumped on expectations of reduced demand
as economies from the euro zone to Taiwan contract.
The fate of U.S. corporate titans like General Motors
<GM.N>, Ford Motor Company <F.N> and Citigroup <C.N> was
uncertain, adding to a general mood of anxiety.
Citigroup, not long ago the world's most valuable financial
firm, was reportedly considering selling itself. []
Democratic congressional leaders demanded executives at the
Big Three automakers come up with a detailed business survival
plan in exchange for their support of up to $25 billion in
loans. []
"It's one car crash after another for the markets right now
and the risk of global economic recession is deepening by the
day," said Martin Slaney, head of derivatives at GFT in
Australia.
Investors priced in a 1-in-3 chance that the U.S. Federal
Reserve would cut its benchmark interest rate to 0.25 percent
from 1 percent on or before its last policy meeting of the year
on December 16.
A growing number of Fed officials are talking about an
unprecedented monetary expansion, with more economists
expecting the base rate to hit zero.
Japan's Nikkei share average <> dropped 2.2 percent,
extending its weekly decline to around 12 percent.
Stocks in the Asia-Pacific region excluding Japan were down
2 percent, according to an MSCI index <.MIAPJ0000PUS>, after
earlier slipping to their lowest since October 2003 when global
markets were just beginning to recover from the bursting of the
dotcom bubble.
The MSCI All-Country World Index <.MIWD00000PUS> fell 0.5
percent, plumbing the lowest levels since April 2003, having
now fallen 53 percent this year.
Hong Kong's Hang Seng index <> shed 3 percent, with
widespread weakness most acute in the financial, real estate
and commodity-related sectors.
ARE WE THERE YET?
A drop of more than 50 percent in the S&P 500 U.S. stocks
index <.SPX> from its peak, the worst bear market since The
Great Depression, has uncovered attractive valuations. Still,
economic uncertainty has made value investing tricky business.
"We see this as an attractive buying opportunity given the
magnitude of the drop," said Dariusz Kowalczyk, chief
investment strategist with CFC Seymour in Hong Kong.
"Moreover, the U.S. should emerge from recession in Q2 09,
which implies that -- historically -- stocks are likely to
bottom out in late Q4 08," he said in a note.
U.S. crude oil for January delivery <CLc1> was down more
than half a dollar at $48.85 a barrel, after the December
contract settled down $4 at $49.62, the lowest settlement since
mid-May 2005. Oil has tumbled by nearly $100 from record highs
in July.
For global investors, the yen is a weather vane of risk
taking, with strength in the Japanese currency reflecting
distaste for anything resembling risk.
The yen slipped from 3-week highs against the dollar and
euro on Friday as short-term speculators booked profits, but it
retained its overall strength with fears of a deep global
recession rippling through markets.
The dollar traded at about 94.00 yen <JPY=>, up 0.4 percent
on the day, and recovering from a 3-week low of 93.55 yen. The
euro edged up 0.3 percent to 117.05 yen <EURJPY=R>, above a
3-week low of about 116.45 yen.
"The market needs positive news on the future of U.S.
automakers to make a decisive rebound, or there's little
prospect that the current support for the yen will abate soon,"
said Minoru Shioiri, chief manager of forex trading at
Mitsubishi UFJ Securities in Tokyo.
Government bond prices remained in demand, with falling
equity markets sending danger signals for risk taking.
Japanese government bond futures hit a 2-month high on the
slide in Tokyo share prices and the previous day's decline in
U.S. Treasury yields to historic lows. December 10-year JGB
futures <2JGBv1> hit the highest since mid-October, at 140.10.
The difference of 10-year yields over 2-year yields, known
as their yield curve, has been steepening globally since the
credit crisis began more than a year ago, reflecting
expectations for lower policy rates.
However, the flight to safety in the last week has
flattened curves, especially in the euro zone and United
States.
(Additional reporting by Satomi Noguchi in TOKYO and Mette
Fraende in SYDNEY, editing by Dhara Ranasinghe)
