By Kevin Plumberg
HONG KONG, May 21 (Reuters) - Asian stocks fell for a
second consecutive day on Wednesday, feeding a rally in
safe-haven government bonds, as investors feared consumer
demand would falter in the face of high oil prices.
Japanese stock indexes were the biggest decliners in the
region, with the broad TOPIX on track for its largest drop in a
month, after U.S. light crude climbed to a record $129.60 a
barrel on Tuesday, driven by concern about dwindling global
stockpiles.
Its rise was given added impetus by a prediction from
billionaire investor T. Boone Pickens that the price could hit
$150 a barrel in the next six months.
Printer and copier maker Canon Inc <7751.T> led Japan's
Nikkei share average down 2 percent to 13,880.88 after Wall
Street tumbled on disappointing earnings from U.S. retailers,
which fuelled concern about a slowdown in demand.
A second day of strength in the yen also weighed on
Japanese exporters and dragged the TOPIX down 2.4 percent.
By 0353 GMT, the MSCI index of Asian stocks excluding Japan
<.MIAPJ0000PUS> had slid 0.9 percent to 492.17 after hitting a
four-month high on Monday.
The financial sector was the heaviest weight on the
Shanghai Composite index, which was down 1.9 percent at
3,378.83 <>.
South Korean stocks fell 1.1 percent to 1,851.78 as
negative sentiment spread across the region, especially after
news that core U.S. producer prices in April had their biggest
annual gain since December 1991.
"It appears that the market's fear has materialised in hard
numbers, and sentiment will definitely be heavy today," said
Kim Seung-han, a market analyst at CJ Investment & Securities
in Seoul.
"Oil prices and inflation have come up as the next big
worry in the market, and the index will continue to be sluggish
unless we see some stabilisation on this front," Kim added.
LOOKING FOR SAFETY
With growing uncertainty in financial markets about the
outlook for the global economy, investors turned to the
relative safety of government bonds.
Japanese government bond (JGB) futures rebounded from a
seven-month low plumbed last week as investors became fearful
that soaring oil prices would hit corporate profits and
heighten the risks to the domestic economy.
"The theme of the market could shift back to the economic
slowdown and credit crunch," Eiji Dohke, chief JGB strategist
at UBS Securities, said in a note to clients.
June 10-year JGB futures <2JGBv1> were up 0.39 point at
135.86 after jumping as high as 136.09 early in the session.
The benchmark 10-year yield <JP10YTN=JBTC>, which moves
inversely to the price, dipped 3.5 basis points to 1.605
percent, well off a seven-month high of 1.710 percent hit on
Friday.
Overnight gains in U.S. Treasury bonds also helped. The
benchmark 10-year Treasury yield was at 3.7690 percent, down
from 3.7803 percent on Tuesday and 14 basis points lower than a
week ago.
However, South Korean government bond yields rose after the
country's finance ministry revived fears about possible
measures to curb short-term external borrowing.
The U.S. dollar slipped against the euro ahead of the Ifo
index of German business sentiment for May due later in the
day.
The euro was up 0.1 percent at $1.5667 <EUR=>, near a
three-week high of $1.5685 touched earlier in the morning. The
New York Board of Trade's U.S. dollar index fell to a one-month
low of 72.304 <.DXY>.
The U.S. dollar was particularly week against Asian
currencies, falling 0.4 percent against the South Korean won to
1,045.90 won <KRW=> and 0.3 percent against the Malaysian
ringgit to 3.23 ringgit.
"For this week, inflation data from Malaysia, Hong Kong and
Singapore, as well a Bank of Thailand meeting later today,
could spark renewed interest in Asian currencies as the
growth-inflation balance tilts towards keeping consumer prices
in check," said economists at United Overseas Bank Group in a
research note.
Gold, which is often used by investors to hedge against
inflation, rose to a one-month high above $920 an ounce
<XAU=>.
(Editing by Alan Raybould)
