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GLOBAL MARKETS-Nikkei leads Asian stocks down; yen buoyant

Published 08/24/2010, 03:32 AM
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* Asian stocks fall, but China, Indonesia limit losses

* Japan's Nikkei closes below 9,000 to 15-month low

* Euro hits six-week low vs dlr, nine-year trough vs yen

* Gold at one-week low; oil at 7-week trough

By Kevin Yao

SINGAPORE, Aug 24 (Reuters) - Asian stocks fell on Tuesday, with Japan's Nikkei index closing below a key support level as investors fretted about an anaemic global recovery, while the Japanese yen hit a nine-year high against the euro.

Recent data, particularly those from the United States and Europe, have showed signs of fatigue of the global economy despite the extension of accommodative policy measures in most countries, prompting investors to shun riskier assets.

Major European shares opened nearly a percent lower, and futures for the S&P 500 were down 0.4 percent at 0710 GMT, pointing to a lower start for U.S. trade as well.

Japan's Nikkei average fell 1.3 percent, dipping below the closely watched 9,000 mark for the first time in 15 months, pressured by selling from hedge funds and foreigners.

Investors have in recent weeks dumped Japanese stocks amid worries the yen's unfettered appreciation could further undermine the country's tepid economic recovery.

The Nikkei index has shed nearly 15 percent so far this year, compared with a 2.6 percent fall in the MSCI Asia ex-Japan index.

The 9,000-9,100 range had been strong technical support for the benchmark Nikkei since last year.

Germany confirmed its economy grew 2.2 percent in the second quarter from the previous three months -- the fastest rate since reunification.

Investors awaited data on the euro zone June industrial orders and U.S. existing home sales, which are expected to show a drop of around 12 percent in July, underlining the weakness of the housing market.

"If the U.S. housing market is not good now, that means the U.S. economy will not be good in coming 2-3 quarters," said K.C. Law, chief economist and strategist at Bank of Communications in Hong Kong.

The MSCI index of Asia Pacific stocks outside Japan fell 0.9 percent, but the loss was limited by rising Chinese stocks, lifted by strong corporate earnings, and resilience in southeast Asia.

Indonesian stocks hit a fresh record high as investors bet on robust growth in Southeast Asia's largest economy.

Overnight, both the Dow Jones industrial average and the Standard & Poor's 500 Index finished lower despite flurry of corporate takeover activity, usually a sign of investors optimism.

YEN BUOYANT

The euro sank to a nine-year low against the yen as the loss of key chart support led speculators to short the currency in the hope of forcing stop-loss sales against both the yen and the dollar.

The euro fell as low as 107.21 yen, its lowest since November 2001. It later edged back to 107.35 yen, down 0.4 percent on the day.

Against the dollar, the euro hit a six-week low of $1.2620.

Bears were targeting $1.2605, the 50 percent retracement of the euro's rise from a four-year low of $1.1876 in June to its August peak of $1.3334. A break here would open the way to at least $1.2522 and then $1.2479, daily lows from July.

The August euro zone purchasing managers index for manufacturing, which drove a large part of the economy's return to growth in the third quarter of last year, saw its pace of growth slowing, data showed on Monday.

With the yen hovering near a 15-year high against the dollar, investors were cautious about possible steps by Japanese authorities to temper the yen's rise, but direct yen-selling intervention appears to be out of the radar screen for now.

Japanese Prime Minister Naoto Kan and Bank of Japan Governor Masaaki Shirakawa discussed the yen and had agreed to work closely in a phone conversation on Monday, but Kan did not ask the central bank to ease monetary policy further, and the two did not touch on currency intervention either.

Spot gold fell more than $2 to $1,221 an ounce after hitting a one-week low of $1,219.30, as falling equities prompted investors to sell bullion to cover losses, while a firmer dollar also put pressure.

Crude oil lost nearly a dollar at $72.20 a barrel, a seven-week low, as the dollar rose and the lacklustre U.S. driving season approached its end without triggering a seasonal stockpile drop. (Additional reporting by Aiko Hayashi in TOKYO; Editing by Mathew Veedon)

* For Reuters Global Investing Blog, click on

http://blogs.reuters.com/globalinvesting

* For the MacroScope Blog, click on

http://blogs.reuters.com/macroscope

* For Hedge Fund Blog, click on

http://blogs.reuters.com/hedgehub

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