Weak U.S. economic data and a grim outlook for Japanese banks caused Asian stocks to sag and safe-haven bonds to rise on Friday, while oil fell further after its biggest monthly drop since 2004.
Hopes of a speedy economic recovery were dented by a surprise jump in U.S. weekly jobless claims, a lower than expected second-quarter gross domestic product and a shock revision of data that showed the U.S. economy shrank in the final quarter of 2007, revealing a brush with recession.
Asian shares slumped, with Tokyo stocks hitting a two-week low, troubled by the performance of Japanese banks after sharp declines in first-quarter profitability at Mizuho Financial Group and Sumitomo Mitsui Financial Group
Financial bookmakers called for Britain's FTSE 100 index to open down 28-35 points, or as much as 0.6%, Germany's DAX down 31-32 points, or 0.5%, and France's CAC down 27 to 31 points, or 0.7%.
"The global economic outlook is deteriorating and corporate earnings are also getting worse — together they are creating selling pressure," said Yoku Ihara, manager at investment information department at Retela Crea Securities in Japan.
Tumbling profits caused Japanese electronics maker NEC Corp to plummet 16.5%, its worst one-day fall in 21 years contributing to a 2.1% drop in the Nikkei average
Investors were also cautious ahead of a U.S. July employment report later on Friday. Economists polled by Reuters expect it to show that companies shed 75,000 workers in July, making that the seventh straight month of job losses.
MSCI's index of Asia stocks outside Japan sagged 1.4%.
Sydney's S&P/ASX 200 index fell 1.5% and Hong Kong's Hang Seng index eased 1.5%.
"This has been a week of unusually low turnover with investors unable to find any investment ideas," said Linus yip, strategist with First Shanghai Securities in Hong Kong.
"Now investors are clear that nothing will change fundamentally for as long as U.S. housing prices and sales keep on the decline. All the measures taken so far have only worked around this problem without looking to fix it."
The flight from equities into safe-haven securities caused the yield on 10-year Japanese Government Bonds to touch a three-month low of 1.505% on Friday, although trade remained relatively light ahead of the U.S. data.
OIL CHECKS DOLLAR SLIDE
Equities took little heart from a continuing sell-off in oil, normally a sign of cheaper fuel for energy-hungry companies and stretched consumers.
U.S. crude oil fell 0.6% to $123.33 a barrel after plunging more than 2% on Thursday. That capped the market's worst month in more than three years, as weak U.S. economic figures reinforced worries about shrinking demand in the world's top energy consumer.
"High oil prices are taking their toll on western economies. Prices are now on a downward trend due to weaker U.S. economic data," said Gerard Rigby of Fuel First Consulting in Sydney.
Demand worries have pulled oil down from a record above $147 a barrel hit on July 11, the peak of a six-year rally set in motion by an Asian economic boom. Oil's 11.4% loss for the month of July marked the biggest monthly loss in%age terms since December 2004.
The fall in oil contributed to the steepest monthly drop in 28 years for the Reuters-Jefferies CRB commodities index, which lost 10% in July, the biggest drop since March 1980. The index had gained almost 20% in the April-June quarter.
Oil's decline helped to slow the dollar's slide. It hovered around 107.52 yen as Europe's trading day began.
The dollar also edged up towards a one-month high against the euro with investors viewing the U.S. jobs report as a key hurdle for whether the U.S. currency can sustain its rebound.
"The euro appears to be peaking out. The ECB hiked rates in July and inflation still remains a threat, but indicators this week did not show euro zone economic conditions in a positive light," said Takahide Nagasaki, chief forex strategist at Daiwa Securities SMBC.
The euro fell 0.2% to $1.5565 Traders said a recent string of weak European data was weighing on the euro against the yen in Asian trade and undermining the euro versus other currencies.
