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GLOBAL MARKETS-Japan stocks fall, dollar hits 8-month low vs yen

Published 08/04/2010, 03:17 AM
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* Nikkei dips 2.1 percent as strong yen hurts exporters

* Dollar crawls towards 15-year low vs yen

* MSCI Asia ex-Japan off 3-month high, down

* Treasury yields down on weak U.S. data, Fed talk

By Kevin Yao

SINGAPORE, Aug 4 (Reuters) - Japanese stocks fell behind their Asian peers and slid 2 percent on Wednesday as the yen climbed towards 15-year highs against the U.S. dollar after weak U.S. data spurred talk of more Federal Reserve easing.

Asia-Pacific stocks outside of Japan were slightly off their three-month peaks scaled on Tuesday and are seen prone to profit-taking as investors remain sensitive to any signs of fatigue in the global economy.

The latest signs came in the form of disappointing U.S. consumer spending and housing market reports, which fanned speculation the Fed may further relax its loose policy at its Aug. 10 meeting and pushed the dollar to an eight-month low.

European shares were set to open lower, with financial spreadbetters expecting Britain's FTSE 100 to fall about 0.4 percent; Germany's DAX to fall 0.2 percent and France's CAC 40 to ease 0.1 percent.

Tokyo stocks fell 2.1 percent, hit by fears that a strong yen ill erode exporters' profits and sap economic growth.

Such concerns combined with a run of disappointing U.S. data that cast a pall over recovery in the world's largest economy, boosted Japanese government bonds, pushing the 10-year yield below 1 percent for the first time in seven years.

Japan's finance minister reiterated that he was closely watching currency moves as the dollar's weakness tests the tolerance for a stronger yen as the economy struggles to pull out of a crippling spell of deflation.

"Today's stock fall is really all about the yen. At this kind of level, there's inevitably worries about what sort of impact this will have on company earnings going forward," said Toshiyuki Kanayama, a market analyst at Monex Inc.

Chip gear manufacturer Tokyo Electron tumbled nearly 5 percent, while digital camera maker Canon Inc declined 4 percent and electronics parts maker Kyocera Corp fell 3 percent.

The MSCI Asia-Pacific index that excludes Japapn was down 0.1 percent.

Overnight, both the Dow Jones industrial average and the Standard & Poor's 500 Index fell as disappointing earnings and economic data trigged profit-taking after Monday's rally drove them to a 10-week high.

Data showed U.S. consumer spending and incomes were flat in June while home purchase contracts tumbled to a record low, implying an anaemic economic recovery for the remainder of this year.

U.S. Treasury debt climbed, sending two-year yields to an all-time low amid speculation that the Fed may launch a new round of debt purchases to inject cash into the economy.

WEAK DOLLAR

Talk of further Fed easing prompted investors to cut their dollar exposure, pushing the U.S. currency as low as 85.32 yen, its lowest since late November.

A fall below a November low of 84.82 yen would take the pair to its lowest level in 15 years.

"The market is full of dollar bears," said Ayako Sera, market strategist at Sumitomo Trust & Banking.

The euro dipped a fifth of a percent from late U.S. trade to $1.3205, remaining within sight of a three-month high of $1.3262 reached on Tuesday.

Stronger growth in Europe and Asia has supported the view that central banks in those regions could raise interest rates before the Fed.

The dollar index, which gauges its performance against major currencies, was steady at 80.65 -- still below its 200-day moving average. It fell below the key moving average for the first time since January, signalling further falls.

Spot gold rose as far as $1,194.75 an ounce, the highest in just over one week, as speculators bet China's demand would increase and as investors shifted out of equities on concerns about the U.S. economy.

Oil fell 45 cents to $82.11 a barrel after touching $82.64 on Tuesday, the highest in three months. (Additional reporting by Elaine Lies and Rika Otsuka in TOKYO, Editing by Tomasz Janowski)

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