* Investors abandon risk, seek safety
* Fears about dented consumer demand hurt exporters
* Gold rises for fourth day, oil back above $125
(Updates prices, adds European outlook)
By Kevin Plumberg
HONG KONG, July 29 (Reuters) - Asian stocks fell around 2
percent on Tuesday, after Merrill Lynch, the third-largest U.S.
investment bank, announced a $5.7 billion write-down related to
bad debt, draining confidence in the shaky financial sector.
Coming a day after one of Australia's top banks said it
would write down more than $1 billion in credit-related losses,
Merrill's news increased fears that a year-old financial crisis
that has battered markets has further to run. []
European stock markets <> opened nearly 1 percent
lower.
Worries that financial sector troubles will further
undermine the global economy kept the U.S. dollar trading below
Monday's one-month high against the yen. Gold prices rose for a
fourth day and Japanese government bonds climbed, pushing the
benchmark 10-year yield down to the lowest level in three
months.
"Equity markets are capitulating on expectations of a
deepening of the global banking crisis. Asian and emerging
markets are experiencing capitulation due to risk aversion,"
Sean Darby, chief Asia strategist at Nomura in Hong Kong, said
in a note to clients.
Japan's Nikkei share average <> finished 1.5 percent
lower, weighed by shares of high-profile exporters such as
Honda Motor Co <7267.T> and Canon Inc <7751.T>, as investors
continue to punish companies dependent on overseas demand.
After the market closed, Nomura Holdings Inc <8604.T>,
Japan's largest brokerage, posted a surprise quarterly net
loss, hurt by a dearth of new share offerings. []
Shares in the rest of the Asia-Pacific region fell 2.2
percent, according to an MSCI index <.MIAPJ0000PUS>. The index
last week briefly broke above a downward trend that stretched
back to May 19, but has since fallen for three consecutive
days.
Hong Kong's Hang Seng <> fell 2.4 percent, while
Taiwan's TAIEX index <> ended down 3 percent.
South Korea's KOSPI <> dropped 2 percent, led by
Samsung Electronics Co Ltd <005930.KS> and LG Electronics Inc
<066570.KS>, consumer-oriented companies which last week issued
grim views of the global economy.
Australia's benchmark S&P/ASX 200 <> slid 1.5 percent,
with shares in Commonwealth Bank of Australia <CBA.AX> and
National Australia Bank <NAB.AX> both down around 4 percent.
Merrill Lynch said it will take a $5.7 billion
third-quarter write-down as it unloads huge amounts of risky
debt, and will raise $8.5 billion by selling new stock, a move
that could dilute the value of existing shares.
The Wall Street investment bank and brokerage announced its
plans less than two weeks after posting a $4.9 billion
second-quarter loss, hurt by more than $9 billion of
write-downs.
NERVOUSNESS AND SECOND GUESSING
"Worries about what's coming out of the woodwork next is
going to see investors take a bit of time to feel more
comfortable about the financial sector," said Tony Russell,
senior equities adviser at ABN AMRO Morgans in Australia.
"There will be a lot of nervousness and second guessing."
The benchmark 10-year Japanese government bond yield fell 2
basis points to 1.545 percent <JP10YTN=JBTC>, after earlier
hitting its lowest since late April at 1.525 percent.
Corporate credit investors in Asia also began to price in a
slightly higher chance of default as equity markets weaken and
turmoil in the global financial sector persists.
The Asia ex-Japan iTRAXX high-yield index <ITAHY5UA=GFI>, a
key measure of risk aversion, widened by 10 basis points to
535, while the equivalent investment-grade index <ITAIG5UA=GFI>
widened by 2 bps to 138, according to BNP Paribas.
Asian credit spreads remain well below the record highs hit
in March in the run-up to the meltdown of U.S. investment bank
Bear Stearns, but are still at more than double the levels at
the beginning of the year.
Gold, still considered by many as a safer alternative in
times of heightened market volatility and inflation, edged up
to nearly $931 an ounce <XAU=>. Lately, gold has followed the
movements of oil prices closely.
Oil prices rose briefly above $125 a barrel <CLc1>, after
militant attacks cut Nigerian output and uncertainty deepened
about Iran's nuclear ambitions.
The U.S. dollar was relatively steady against the yen at
107.48 yen <JPY=> after climbing to a one-month high on Monday,
above 108 yen. The euro was unchanged at $1.5734 <EUR=>.
For many investors, focus for the rest of this week will be
on a busy calendar of U.S. economic indicators, including the
July employment report. In addition, Asian companies announcing
their results include Mizuho Financial Group <8411.T> and TSMC
<2330.TW>, the world's biggest contract chip maker.
(Additional reporting by Geraldine Chua in SYDNEY and Rafael
Nam in HONG KONG, Editing by Dhara Ranasinghe)
