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Asian stocks fall on Lehman fears; oil gains PDF Print E-mail
Friday, 12 September 2008

REUTERS, HONG KONG/SINGAPORE- Asian shares fell about 1 percent and US Treasuries dipped on Wednesday on fears about Lehman Brothers' ability to raise capital, demonstrating Washington's bailout of Fannie Mae and Freddie Mac this week had not fixed the credit crisis.

Oil prices rose above $103 a barrel from a five-month low, after OPEC agreed to a small but unexpected product cut.
 
A retreat in oil prices from a record high in July has supported the US dollar, which hit an 13-month high against the euro.
 
While the US government bailout of its top mortgage finance companies on Sunday removed a big risk of a system-wide failure, problems at other financial institutions were painful reminders of how severely an avalanche of bad loans has threatened almost every major economy.
 
Shares of firms such as Macquarie Group Ltd, Australia's largest investment bank, fell 1.3 percent after Lehman's stock plunged 45 percent overnight on fears it would not be able to raise the funds it needs to survive.
 
European equities were set to fall, with futures for the Eurostoxx 50 STXEc1, Germany's DAX FDXc1 and the French CAC 40 down between 0.4 and 0.6 percent.
 
Lehman reports its quarterly results ahead of the US stock market open.
 
"Today's fall is a Lehman shock," said Yoku Ihara, manager of the investment information department at Retela Crea Securities. "We thought the market would rebound after the Freddie and Fannie news, but Lehman rekindled worries."
 
The Wall Street Journal reported Lehman was in talks with investment firm Blackrock Inc to sell a package of British residential real estate assets and was looking at spinning off some commercial property assets.
 
A South Korean government official said state-owned Korea Development Bank (KDB) had ended talks on a possible investment in Lehman, but state news agency Yonhap quoted an unnamed official as saying KDB was seeking management rights in Lehman for around $6 billion.
 
The dollar extended its gains against the yen after the report and rose 0.36 percent to 107.22 yen.
 
The Asia-Pacific index of shares traded outside of Japan was 1 percent lower moving back towards Friday's 22-month low.
 
Tokyo's Nikkei share average .N225 pared losses to 0.4 percent after briefly touching a six-month intraday low earlier.
 
Australia's benchmark S&P/ASX 200 index lost 1.5 percent, led by shares of miners BHP Billiton and Rio Tinto Ltd.
 
Hong Kong's Hang Seng index .HSI dropped 1.5 percent.
 
Worries about the prospect of another US bailout for Lehman Brothers dragged US Treasuries, with 10-year yields rising almost 6 basis points. Japanese bonds initially gained, but the September 10-year JGB futures soon was trading nearly flat at 136.94.
 
The euro was also listless ahead of the Lehman results, trading nearly steady at $1.4135 nearly 20 cents lower than where it was in mid-July when crude prices peaked.
 
DOLLAR BEARS
 
A combination of falling commodity prices, a desire to avoid risk taking and signs of economic gloom spreading to Europe and Japan have all pushed the dollar higher for the last two months.
 
However, some fund managers are holding fast to their long-term negative view on the US currency. Even the excitement over the Fannie and Freddie bailout seemed to have all but evaporated.
 
"The bail-out honeymoon already appears to be over. Risk aversion was back with a vengeance...," Rabobank said in a note to clients.
 
V Anantha Nageswaran, a strategist with Julius Baer, said the bailout and the rally it spurred in risk assets were like "comic interludes" in a long-drawn deleveraging process.
 
"A new risk cropped up and they addressed that new risk. That doesn't mean the underlying risk went away, which is that the shrinking of household and financial sector balance sheets is a multi-year process," Nageswaran said.
 
While gauges of investors' distaste for risk taking have fallen from mid-July highs, they have risen steadily so far in September. The so-called TED spread of 3-month borrowing rates among large banks over the 3-month US Treasury bill yield widened to the most since July 23 on Wednesday.

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