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By Louise Heavens
SINGAPORE, May 12 (Reuters) - Stocks fell on Monday,
weighed down by uncertainty over the health of the U.S. economy
and surging oil and commodity prices, while Japanese exporters
felt the pinch from a stronger yen.
The dollar held steady but remained on the defensive after
a sharp fall on Friday following news that American
International Group <AIG.N>, the world's biggest insurer,
posted its largest ever quarterly loss and said it planned to
raise $12.5 billion in fresh capital.
The announcement, together with crude oil's record high
above $126 a barrel, heightened concern about the health of the
U.S. economy, and sent the Dow Jones industrial average <>
down 0.9 percent.
AIG's huge loss pressured the region's banks and financial
stocks, including Japan's Mitsubishi UFJ Financial Group
<8306.T>.
Tokyo's market was also dragged lower by weaker exporters,
such as Canon Inc <7751.T>, as strength in the yen, which rose
last week by more than 2 percent against the dollar, threatened
to eat into profits.
The Nikkei <> dropped 0.2 percent by its midsession
break.
"The market's weak moves could be a signal that the rebound
from March 17 (when the Nikkei hit a recent bottom) is at its
peak around here," said Kenichi Hirano, operating officer at
Tachibana Securities.
"With the Nikkei average's price-earnings ratio over 16,
it's hard to expect it to go up further," he said.
Shares across the rest of Asia <.MIAPJ0000PUS> were steady
by 0202 GMT. The benchmark is down just more than 8 percent so
far this year, but had rallied sharply in March after it had
fallen to its worst level since August 2007 with the collapse
of U.S. investment bank Bear Stearns.
Singapore's main index <.FTSTI> shed 0.2 percent and
Taiwan's index <> edged lower, but Australia's benchmark
<> rose 0.6 percent, lifted by news that Westpac Banking
Corp Ltd <WBC.AX> was in talks on an all-share bid for St
George Bank Ltd <SGB.AX>, which has a market value of A$15
billion ($14 billion). []
Markets in Seoul <> and Hong Kong <> were closed
for a public holiday.
DOLLAR FLOOR
The dollar was steady against major currencies after its
fall late last week as investors waited for more clues on the
policy outlooks for the Federal Reserve and European Central
Bank, while eyeing the relentless rise in oil prices.
"It will take time for markets to make conclusions about
the relative monetary policy outlooks," said Tomoko Fujii, head
of Japan economics and strategy at Bank of America.
"It is not easy to draw conclusions about whether the Fed
is really done or not."
The dollar fetched 102.98 yen <JPY=>, up 0.2 percent from
U.S. trade late last week. The euro <EUR=> bought $1.5445, down
slightly from $1.5481 on Friday.
A long-term slide in the dollar has helped fuel a surge in
the cost of raw materials, which are mainly priced in the U.S.
currency, with everything from oil to corn and copper hitting
historic highs.
Crude oil <CLc1> rose on Monday to $126.14 a barrel,
holding close to a record high of $126.27 hit on Friday.
Middle East violence is the latest factor to raise concerns
about potential supply disruptions from the world's largest
crude producing region.
Spot gold <XAU=> changed hands at $884.95/885.95 an ounce,
little changed from late trading levels in New York on Friday.
Japan's June 10-year futures slipped 0.24 point to 136.36.
The benchmark 10-year yield rose 2 basis points to 1.575
percent <JP10YTN=JBTC>.
