Asian stocks fell on Thursday on gloom about the ability of exporters to weather a widespread economic slowdown, while the U.S. dollar slipped as oil prices rose to above $116 a barrel and halted a rally in the currency.
The U.S. housing market, the source of a financial crisis that threatens to drag all Group of Seven rich nations into a recession, remained a chief concern, as shares of top mortgage finance companies Fannie Mae and Freddie Mac tumbled overnight to their lowest in nearly 20 years.
Crude prices rose for a third day after an agreement on a U.S.-Poland missile shield drew a cold response from Russia, the world's second-largest oil producer. Crude edged to above $116 a barrel adding cost headaches to corporate managers already frazzled by shrinking demand.
"Exporters don't have power to keep rising as the U.S. and European economies are getting worse and the demand volume is declining," said Takahiko Murai, general manager of equities at Nozomi Securities in Tokyo.
Shares of high profile exporters such as Canon Inc, Samsung Electronics Co Ltd and Taiwan Semiconductor were among the top drags on their respective indexes.
Japan's Nikkei share average slipped 0.3 percent, within striking distance of chart support around 12,670, below which would mark a 4-1/2-month low.
Outside Japan, Asia-Pacific shares fell 0.7 percent, approaching a 17-month low touched on Tuesday, according to an MSCI index
Hong Kong's Hang Seng index dropped 1.3 percent after dipping to a 1-year low on Wednesday, with a fall in China Mobile shares leading the way.
The Shanghai composite index slipped 1.7 percent, unable to sustain momentum after posting its biggest single-day rise in four months on Wednesday.
Hopes for a near-term fiscal stimulus package from Beijing faded amid doubts about the need for government support in what is still the world's fastest growing major economy.
Louis Wong, research director with Phillip Securities in Hong Kong, said markets were unlikely to get a helping hand from China's government any time soon, especially as the country's financial sector is in relatively good shape compared with Europe and the United States.
"There have been no bank failures in China and mainland banks are reporting high double digit earnings growth, so what is the logic for a stimulus package?" he said.
Unidentified officials with China's National Development and Reform Commission and the Ministry of Finance denied or said they were unaware of market talk that China was considering a 200-400 billion yuan stimulus plan, according to the International Finance News.
There were also signs that slack demand from developed economies for Asian exports is shifting the global trade dynamic. July figures from Japan showed exports to China topped exports to the United States for the first time since World War II. Whether demand from China alone could support the entire global economy is another issue altogether. Expectations for the global economy have fallen to their lowest level in nearly 18 years, with the outlook in Western Europe and Asia deteriorating, the Ifo economic research institute said on Wednesday.
U.S. crude futures rose by $1 to more than $116.60 a barrel on supply concerns after Russia expressed its displeasure over a U.S.-Poland missile shield pact.
That helped hold back the U.S. dollar, which has rallied more than 8 percent in the last month against the euro on increasing signs the European Central Bank will not raise interest rates this year to fight inflation as the economy shrinks.
The euro was up 0.25 percent to $1.4779 well above a six-month low of $1.4630 touched on Tuesday, but 8 percent below a record high of $1.6040 in mid-July.
Against the yen, the dollar slipped 0.2 percent to 109.61 yen about a yen below a seven-month high of 110.67 yen hit last week.
Spot gold edged up to around $815 an ounce as firmer oil prices encouraged safe-haven asset buying.
