GLOBAL MARKETS-Asian stocks slide as inflation fears mount

Reuters: [2008-05-26 06:19:00]

(Updates prices, adds Hong Kong stocks and capital flow data)

By Kevin Plumberg

HONG KONG, May 26 (Reuters) - Asian stocks fell 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 in the region's biggest export market.

Oil prices edged higher as the dollar eased, but trade in Asia was subdued with the U.S. and UK financial markets closed on Monday for national holidays.

Major stock indexes in Japan, Hong Kong and China dropped 2 percent after U.S. markets last week chalked up their biggest decline in three months as oil prices rocketed to record highs, heightening concern about consumer demand and company earnings.

"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.

By midday, Japan's Nikkei share average <.N225> had fallen 2 percent and looked set for its largest single-day decline in two weeks, led lower by exporters such as Canon Inc <7751.T> and clothing firm Fast Retailing Co Ltd <9983.T>.

The MSCI index of Asian stocks outside Japan <.MIAPJ0000PUS> fell 1.5 percent, on track for a fifth straight session of losses.

China Mobile <0941.HK> stock sank 7.6 percent, helping to knock down Hong Kong's Hang Seng index <.HSI> after Goldman Sachs downgraded shares of the world's largest wireless carrier to "sell" following a sector-wide restructuring plan announced last week which will heighten competition.

South Korea's KOSPI <.KS11> slid 1.5 percent to its lowest since April 23. Shares of Samsung Electronics Co Ltd <005930.KS>, the world's second-largest mobile phone maker, were the biggest drag on the index, tumbling 4.1 percent, amid talk that Nokia <NOK1V.HE> may cut prices and re-enter the South Korean market.

Investors are also awaiting inflation data from both the euro zone and United States later in the week.

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>.

Still, the overarching trend since March has been a cautious shift from bonds to stocks despite higher volatility in both equity and fixed income markets.

Emerging market equity funds have received $16.7 billion in fresh investment since the beginning of April, recouping all but $3.3 billion of the losses incurred during the first three months of the year, according to data from EPFR Global.

Meanwhile, investors have pulled money out of global bond funds for 15 consecutive weeks, racking up outflows of $10.5 billion so far this year.

BEAR MARKET IN BONDS

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 would ultimately hurt the Japanese economy. If so, that should cool some of the expectations for the Bank of Japan to raise interest rates in the coming year, which have weighed on the bond market.

June 10-year futures <2JGBv1> edged up 0.28 point to 134.63, up from the nine-month trough of 133.93 struck on Friday.

The benchmark 10-year yield <JP10YTN=JBTC>, which moves inversely to the price, was at 1.715 percent, off the nine-month peak of 1.755 percent reached on Friday.

Oil rose towards $133 a barrel on Monday, extending the previous session's gains on a supply outage at the Statfjord oilfield in the North Sea and the weak U.S. dollar.

U.S. light crude for July delivery rose 40 cents to $132.59 a barrel by 0229 GMT, extending Friday's gains of $1.38. It struck a record high of $135.09 in intraday trade last week.

Gold prices have crept higher in May, reflecting investors' unease about inflation. Spot gold <XAU=> on Monday was steady at $926.20 an ounce.

The ailing dollar eased 0.1 percent to 71.888 <.DXY> against a basket of major currencies, hovering near one-month lows.

The euro rose to $1.5790 <EUR=>, up 0.2 percent from Friday. It hit all-time highs above $1.60 last month.

The dollar slid 0.2 percent against the Japanese currency to 103.15 yen <JPY=> as a fall in Tokyo stocks prompted investors to unwind risky carry trades. In carry trades, low-yielding currencies such as the yen are used to finance purchases of assets offering higher returns elsewhere.

"The dollar continues to stay on a downward trend with many players just looking for a chance to sell it," said Tsutomu Soma, senior manager of foreign assets at Okasan Securities in Japan. (Additional reporting by Eric Burroughs in Tokyo) (Editing by Kim Coghill) ((kevin.plumberg@thomsonreuters.com; +852 2843-6370; Reuters Messaging: kevin.plumberg.reuters.com@reuters.net)) ((Multimedia versions of Reuters Top News are now available for: * 3000 Xtra: visit http://topnews.session.rservices.com * BridgeStation: view story .134 For more information on Top News: http://topnews.reuters.com))

Keywords: MARKETS GLOBAL

RPT-GLOBAL MARKETS-Asian stocks slide as inflation fears mount

Reuters: [2008-05-26 06:19:00]

(Repeats to more subscribers) (Updates prices, adds Hong Kong stocks and capital flow data)

By Kevin Plumberg

HONG KONG, May 26 (Reuters) - Asian stocks fell 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 in the region's biggest export market.

Oil prices edged higher as the dollar eased, but trade in Asia was subdued with the U.S. and UK financial markets closed on Monday for national holidays.

Major stock indexes in Japan, Hong Kong and China dropped 2 percent after U.S. markets last week chalked up their biggest decline in three months as oil prices rocketed to record highs, heightening concern about consumer demand and company earnings.

"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.

By midday, Japan's Nikkei share average <.N225> had fallen 2 percent and looked set for its largest single-day decline in two weeks, led lower by exporters such as Canon Inc <7751.T> and clothing firm Fast Retailing Co Ltd <9983.T>.

The MSCI index of Asian stocks outside Japan <.MIAPJ0000PUS> fell 1.5 percent, on track for a fifth straight session of losses.

China Mobile <0941.HK> stock sank 7.6 percent, helping to knock down Hong Kong's Hang Seng index <.HSI> after Goldman Sachs downgraded shares of the world's largest wireless carrier to "sell" following a sector-wide restructuring plan announced last week which will heighten competition.

South Korea's KOSPI <.KS11> slid 1.5 percent to its lowest since April 23. Shares of Samsung Electronics Co Ltd <005930.KS>, the world's second-largest mobile phone maker, were the biggest drag on the index, tumbling 4.1 percent, amid talk that Nokia <NOK1V.HE> may cut prices and re-enter the South Korean market.

Investors are also awaiting inflation data from both the euro zone and United States later in the week.

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>.

Still, the overarching trend since March has been a cautious shift from bonds to stocks despite higher volatility in both equity and fixed income markets.

Emerging market equity funds have received $16.7 billion in fresh investment since the beginning of April, recouping all but $3.3 billion of the losses incurred during the first three months of the year, according to data from EPFR Global.

Meanwhile, investors have pulled money out of global bond funds for 15 consecutive weeks, racking up outflows of $10.5 billion so far this year.

BEAR MARKET IN BONDS

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 would ultimately hurt the Japanese economy. If so, that should cool some of the expectations for the Bank of Japan to raise interest rates in the coming year, which have weighed on the bond market.

June 10-year futures <2JGBv1> edged up 0.28 point to 134.63, up from the nine-month trough of 133.93 struck on Friday.

The benchmark 10-year yield <JP10YTN=JBTC>, which moves inversely to the price, was at 1.715 percent, off the nine-month peak of 1.755 percent reached on Friday.

Oil rose towards $133 a barrel on Monday, extending the previous session's gains on a supply outage at the Statfjord oilfield in the North Sea and the weak U.S. dollar.

U.S. light crude for July delivery rose 40 cents to $132.59 a barrel by 0229 GMT, extending Friday's gains of $1.38. It struck a record high of $135.09 in intraday trade last week.

Gold prices have crept higher in May, reflecting investors' unease about inflation. Spot gold <XAU=> on Monday was steady at $926.20 an ounce.

The ailing dollar eased 0.1 percent to 71.888 <.DXY> against a basket of major currencies, hovering near one-month lows.

The euro rose to $1.5790 <EUR=>, up 0.2 percent from Friday. It hit all-time highs above $1.60 last month.

The dollar slid 0.2 percent against the Japanese currency to 103.15 yen <JPY=> as a fall in Tokyo stocks prompted investors to unwind risky carry trades. In carry trades, low-yielding currencies such as the yen are used to finance purchases of assets offering higher returns elsewhere.

"The dollar continues to stay on a downward trend with many players just looking for a chance to sell it," said Tsutomu Soma, senior manager of foreign assets at Okasan Securities in Japan. (Additional reporting by Eric Burroughs in Tokyo) (Editing by Kim Coghill) ((kevin.plumberg@thomsonreuters.com; +852 2843-6370; Reuters Messaging: kevin.plumberg.reuters.com@reuters.net)) ((Multimedia versions of Reuters Top News are now available for: * 3000 Xtra: visit http://topnews.session.rservices.com * BridgeStation: view story .134 For more information on Top News: http://topnews.reuters.com))

Keywords: MARKETS GLOBAL

GLOBAL MARKETS-Asian stocks drop as inflation fears fly

Reuters: [2008-05-26 04:15:00]

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 <.N225> 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 <.KS11> 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) ((kevin.plumberg@thomsonreuters.com; +852 2843-6370; Reuters Messaging: kevin.plumberg.reuters.com@reuters.net)) ((Multimedia versions of Reuters Top News are now available for: * 3000 Xtra: visit http://topnews.session.rservices.com * BridgeStation: view story .134 For more information on Top News: http://topnews.reuters.com))

Keywords: MARKETS GLOBAL

RPT-GLOBAL MARKETS-Asian stocks drop as inflation fears fly

Reuters: [2008-05-26 04:12:00]

(Repeats to wider coding with no changes to text)

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 <.N225> 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 <.KS11> 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) ((kevin.plumberg@thomsonreuters.com; +852 2843-6370; Reuters Messaging: kevin.plumberg.reuters.com@reuters.net)) ((Multimedia versions of Reuters Top News are now available for: * 3000 Xtra: visit http://topnews.session.rservices.com * BridgeStation: view story .134 For more information on Top News: http://topnews.reuters.com))

Keywords: MARKETS GLOBAL

RPT-GLOBAL MARKETS-Global stocks fall, oil prices sour investors

Reuters: [2008-05-23 22:39:00]

(Repeats to fix story number, editors' note) (Updates with close of U.S. markets)

* Oil rebound rekindles inflation fears

* Stocks slide; Dow, Nasdaq set for worst week in 3 months

* Dollar falls; set for biggest weekly slide since March

By Herbert Lash

NEW YORK, May 23 (Reuters) - World stocks slid on Friday as fears that surging oil prices will shackle economic growth soured investor sentiment.

For the U.S. equity market, it was the worst week since February.

Crude oil rebounded from a sharp loss on Thursday, lifted by a weak dollar and long-term supply concerns that briefly pushed oil to a peak over $135 this week.

U.S. Treasury debt prices also recovered some of the previous day's losses as falling stocks rekindled safe-haven buying ahead of a long U.S. and British holiday weekend.

Investors remained focused on crude oil prices that have doubled over the past year and left investors fearing a return of stagflation: sluggish growth with spiraling inflation.

Oil worries pushed the American Stock Exchange index of airline stocks <.XAL> down 4.3 percent while shares of restaurant chains, also seen as vulnerable, were lower.

"Oil prices are what's driving us down again. As they just continue to go higher and higher, that's putting pressure on the economy, and as people think the economy is not going to do so well, that's hurting stocks," said Giri Cherukuri, head trader at OakBrook Investments LLC in Lisle, Illinois.

Economic bellwethers United Tech <UTX.N> and Caterpillar <CAT.N> were among the top drags on the Dow.

General Motors' <GM.N> shares fell to a 26-year low after the automaker said strikes by the United Auto Workers and a just-ended strike at supplier American Axle & Manufacturing Holdings Inc <AXL.N> will reduce its earnings by $2.8 billion.

GM shares fell 4.5 percent to $17.60.

The pace of U.S. existing home sales fell slightly less than expected, helping stocks come off their opening lows, but the inventory of unsold homes surged 10.5 percent in April, a sales rate that would put the supply of homes at 11.2 months.

All three major U.S. stock indexes posted their worst percentage drop in a week since February. For the week, the Dow Jones industrial average fell 3.9 percent, the Standard & Poor's 500 Index dropped 3.5 percent and the Nasdaq lost 3.3 percent.

On Friday, the Dow <.DJI> fell 1.2 percent to 12,479.63, the S&P <.SPX> fell 1.3 percent to 1,375.93 and the Nasdaq <.IXIC> declined 0.81 percent to 2,444.67.

Shares of restaurant chain Cheesecake Factory <CAKE.O> fell 6.4 percent to $19.53 and Darden Restaurants <DRI.N>, the operator of the Red Lobster chain, fell 4.4 percent to $31.74.

European stocks fell 1.7 percent, losing ground for the third day in four sessions, as oil prices weighed on sentiment and a dip in metal prices prompted investors to book recent lofty gains on mining shares.

The FTSEurofirst 300 <.FTEU3> index of top European shares closed lower at 1,322.22 points, ending the week with a 3.1 percent loss, its worst weekly performance since early March.

Mining stocks tumbled, with Rio Tinto <RIO.L> off 4.7 percent and BHP Billiton <BLT.L> down 4.6 percent.

"The market is rattled by the daily oil price rise that has become almost unbearable. That's a real threat to growth and also a big issue for inflation," said Jean-Claude Petit, head of equities at Barclays Wealth Managers France.

Oil prices rebounded after falling more than 3 percent on Thursday. New York oil futures for July delivery <CLN8> settled up $1.38 at $132.19 a barrel. London crude hit a record high of $135.14 a barrel earlier in the week, and New York crude touched $135.09.

"Although yesterday's price pullback would suggest that this bull move is getting a bit long in the tooth, we are still looking for a strong finish to the week," said Jim Ritterbusch, president at Ritterbusch and Associates in Galena, Illinois.

Gains in U.S. government debt were capped by persistent concerns that soaring food and energy prices were likely to sustain inflation pressures, increasing expectations the Federal Reserve will hike rates by the end of the year.

In Europe record high oil prices are likely to keep yields elevated as investors bet that the European Central Bank might be forced to raise interest rates this year -- a view many analysts say is overdone.

The overall picture for euro zone government debt is still rather bleak, said David Schnautz, fixed-income strategist at Commerzbank in Frankfurt.

"The inflation theme is definitely the main topic right now. As long as you get negative news on the inflation front, even the more attractive yields at the moment don't seem to be attractive enough," Schnautz said.

Asian stock markets were mixed after a volatile week. Japan's Nikkei share average <.N225> finished 0.2 higher, boosted by demand for sectors that perform well during periods of economic sluggishness but was down 1.5 percent on the week.

Stocks outside of Japan declined for a fourth day running, shedding 1.1 percent <.MIAPJ0000PUS>, according to the MSCI index.

U.S. government debt rose. The benchmark 10-year U.S. Treasury note <US10YT=RR> rose 18/32 to yield 3.85 percent. The 2-year U.S. Treasury note <US2YT=RR> rose 6/32 to yield 2.44 percent. The 30-year U.S. Treasury bond <US30YT=RR> rose 5/32 to yield 4.58 percent.

The dollar fell against major currencies, with the U.S. Dollar Index <.DXY> down 0.24 percent at 71.969. Against the yen <JPY=>, the dollar fell 0.75 percent at 103.29.

The euro <EUR=> rose 0.27 percent at $1.5771. (Reporting by Kristina Cooke, Lucia Mutikani, John Parry in New York, Margaret Orgill, Ian Chua and Lewa Pardomuan in London and Blaise Robinson in Paris)

(Reporting by Herbert Lash. Editing by Richard Satran) ((herb.lash@thomsonreuters.com; +1 646 223 6019; Reuters Messaging: herb.lash.reuters.com@reuters.net)) ((Multimedia versions of Reuters Top News are now available

for: * 3000 Xtra: visit

http://topnews.session.rservices.com

* BridgeStation: view story .134

For more information on Top News:

http://topnews.reuters.com)) Keywords: MARKETS GLOBAL