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"This month could be very bad" , "Further correction of the market looks likely"

Asian stocks hit by mortgage crisis
Nikkei down nearly 3% as concerns about defaults in U.S. spreads around the world.
March 14 2007: 3:52 AM EDT

SINGAPORE (Reuters) -- Asian shares slumped Wednesday, tracking heavy losses on Wall Street amid fears a crisis in U.S. mortgage lending is spreading to the wider economy.

Bond yields and metals prices slid too, as investors still nursing losses from a sharp sell-off two weeks ago sent Japanese stocks down nearly 3 percent for their second-biggest one-day percentage fall of the year.

Other Asian stock markets fell between 1.5 and 3.3 percent, with shares in exporters hammered by a surging yen and worries of slowing growth in the United States, the region's biggest export market. European markets were expected to open down sharply.

"If the U.S. subprime mortgage problems get worse, it could begin to hurt U.S. consumers, and that would be very hurtful for exporters," said Kim Yung-min, a fund manager at SH Asset Management in Seoul. "This month could be very bad."

U.S. stocks fell 2 percent Tuesday, hit by growing losses at subprime lending firms - those operating at the riskier end of the home loan market - and weak U.S. retail sales.

The yen held gains, after soaring to near a three-month high versus the dollar, as the latest jitters prompted investors to close out trades funded by cheap loans in the Japanese currency.

"What lies underneath selloffs in global shares and recent weakness in the dollar/yen is concerns about the U.S. economy," said a senior trader at an European investment bank. "Things like soft U.S. retail sales data stoked investor worries."

The 10-year Japanese government bond yield slid to a 2-1/2-month low, as concerns the troubled U.S. subprime mortgage sector could hurt the wider economy prompted investors to desert stocks for the relative safety of government debt.

Oil steadied above $58 a barrel, after dropping sharply on Tuesday on concerns a flagging U.S. economy would hit demand, and gold and copper fell further as the wave of risk aversion spread to commodity markets.

Global markets had been showing signs of a tentative recovery from a slide that began at the end of February, when steep losses in Chinese stocks combined with worries about slowing U.S. growth to spark a worldwide flight from riskier assets.

Yen weighs on markets
Tokyo's Nikkei fell 2.9 percent, finishing just above its lowest closing level of 2007 reached on March 5.

"Faced with bearish U.S. economic data and subprime troubles, investors are reviewing an optimistic outlook for stock prices," said Yutaka Shiraki, senior equity strategist at Mitsubishi UFJ Securities. "Further correction of the market looks likely."

MSCI's broadest index of shares elsewhere in Asia fell 2.7 percent by 2:15 a.m. ET, but remained around 3 percent above its 2007 low point reached on March 6.

Australia's S&P ASX 200 fell 2.1 percent and Hong Kong's Hang Seng slid 2.7 percent.

Benchmarks in South Korea, Taiwan and Singapore fell between 1.5 and 3.3 percent.

Shares in exporters led the losses in several markets, hurt by the rising yen - which eats into overseas earnings - and worries of flagging demand in the crucial U.S. market.

In Tokyo, Honda (Charts) fell 3.5 percent, rival car maker Toyota (Charts) lost 3.2 percent and Sony (Charts) shed 4.1 percent, while in Seoul, Samsung Electronics dropped 2.7 percent.

Gains for the yen suggested a shakeout two weeks ago in carry trades -- a strategy in which investors borrow where interest rates are low to buy higher-yielding assets or currencies -- has yet to run its course.

"Concerns about the subprime market have triggered a resumption in risk-aversion trades seen at the beginning of the month," said Hiroshi Yoshida, foreign exchange trader at Shinkin Central Bank.

Data on Tuesday showed U.S. mortgage lenders were initiating foreclosures at a record pace and the chief executive of a large U.S. home lender said the subprime industry -- which caters to borrowers with weak credit -- was in a "liquidity crisis."

The dollar bought around ¥116.10 at 2:15 a.m. ET, down a touch after falling more than 1 percent on Tuesday. The dollar had fallen as low as ¥115.88 earlier Wednesday, edging towards the ¥115.16 level touched earlier in the month for the first time since December.

The euro eased to around ¥153.20 after also tumbling more than 1 percent in the previous session.

The benchmark 10-year Japanese government bond yield was down 4 basis points at 1.565 percent, a level last seen in late December. The yield on the benchmark 10-year U.S. Treasury eased to 4.48 percent from 4.49 percent in late U.S. trade.

U.S. oil was up 17 cents at $58.10 a barrel, after falling nearly $1 Tuesday. Gold fell nearly $4 to around $641.90 an ounce and Shanghai copper dipped more than 1 percent, tracking falling London prices.

http://money.cnn.com/2007/03/14/news/international/bc.markets.global.reut/index.htm