By Kevin Plumberg
HONG KONG, May 26 (Reuters) - Asian stocks fell more than 1
percent on Monday, with regional shares outside Japan hitting a
1-month low, as investors feared rising inflation and sluggish
U.S. economic growth would seriously dent consumer demand.
U.S. stocks last week chalked up their biggest decline in
three months as oil prices rocketed to record highs,
heightening concern about company earnings for the second
quarter.
By the midsession, Japan's Nikkei share average <>
tumbled 2.2 percent, set for the largest single-day decline in
six weeks, led lower by exporters such as Canon Inc <7751.T>
and clothing firm Fast Retailing Co Ltd <9983.T>.
South Korea's KOSPI <> slid 1.7 percent to the lowest
since April 24. Shares of Samsung Electronics Co Ltd
<005930.KS>, the world's second-largest mobile phone maker,
were the biggest drag on the index amid talk that Nokia
<NOK1V.HE> may cut prices and re-enter the South Korean market.
The MSCI index of Asian stocks outside Japan
<.MIAPJ0000PUS> fell 1.4 percent, on track for a fifth straight
day of losses.
"The market is going to start thinking about real
economies. China has held up somewhat but margins are getting
squeezed by higher oil and higher materials prices," said Garry
Evans, pan-Asian equity strategist with HSBC in Hong Kong.
A persistent rise in commodity prices, led by oil's 38
percent climb so far this year, has spooked investors and
brought an abrupt end to a rally in global stock markets that
began in mid-March when the U.S. Federal Reserve backed a deal
to bail out ailing investment bank Bear Stearns & Co Inc
<BSC.N>.
Inflation fears caused a stampede out of U.S. Treasuries
last week, pushing up the yield on the benchmark 10-year note
by 11 basis points. The sell-off quickly spread to Asia as
well.
Japanese government bond futures on Monday edged up from
nine-month lows plumbed last week, but gains were tempered by
many market players, especially large banks, looking to cut
their holdings.
"Market sentiment is pretty bad," said Kenro Kawano, senior
interest-rate strategist at Credit Suisse in Tokyo. "At least
at the moment, it's a bear market."
Kawano said the surge in oil prices and the jump in
interest rates should ultimately hurt the Japanese economy. If
so, that should cool some of the expectations for the Bank of
Japan to lift rates in the coming year, which have weighed on
the bond market.
June 10-year futures <2JGBv1> edged up 0.21 point to
134.56, up from the nine-month trough of 133.93 struck on
Friday.
The benchmark 10-year yield <JP10YTN=JBTC> dipped half a
basis point to 1.730 percent, off the nine-month peak of 1.755
percent reached on Friday.
Crude oil prices ended last week on an up note, lifted by a
weak dollar and long-term supply concerns that had briefly
pushed oil to a peak over $135. New York oil futures for July
delivery <CLN8> settled up $1.38 at $132.19 a barrel.
Gold prices have crept higher in May, reflecting investors'
unease about inflation. Spot gold <XAU=> was up 0.3 percent at
$926.70 an ounce.
The U.S. dollar was largely unchanged against the euro and
yen. The euro was at $1.5776 <EUR=>. Against the yen, the
dollar was at 103.20 yen, down 0.1 percent on the day.
(Editing by Ian Geoghegan)
