GLOBAL MARKETS-Buffett boon peters out as fear preys on stocks

(Adds European outlook, updates prices)

By Tom Miles

HONG KONG, Feb 13 (Reuters) - Asian equity markets wavered on Wednesday after an early surge, fuelled by billionaire investor Warren Buffett's offer to take on $800 billion of U.S. municipal bond risk, petered out and U.S. economic worries resurfaced.

Buffett's plan eased fears for the health of the insurance sector and lifted Asian equities in early trade, although they later slipped back. [ID:nN12216014]

European stocks are set to open about 1 percent lower, with earnings from bid target Rio Tinto (RIO.L), steel major Arcelor Mittal (MTP.PA) and oil group Total (TOTF.PA) to chew over.

Japan's Nikkei average .N225 pared early gains to close 0.4 percent higher as investors avoided making major bets ahead of important Japanese and U.S. economic data. Major banks such as Mitsubishi UFJ Financial Group (8306.T) fell, offsetting gains in exporters such as Canon Inc (7751.T).

MSCI's index of Asian stocks outside Japan .MIAPJ0000PUS was down 0.2 percent by 0655 GMT, while Shanghai stocks .SSEC, which were catching up with global declines after the week-long Lunar New Year holiday, fell 2.4 percent.

Seoul's benchmark Korea Composite Stock Price Index also turned south to finish down 0.7 percent after Woori Finance Holdings' (053000.KS) weak profits and subprime-linked write-offs stirred worries about slowing earnings momentum in the financial sector. [ID:nSEF000100]

"Investors seem to have started bracing for disappointing figures when the United States releases January retail sales data, while continued foreign selling is also a worry," said So Jang-ho, an analyst at Samsung Securities.

BANKS BATTERED

Banks also battered Australia's S&P/ASX 200 index .AXJO which closed 1.2 percent down, lumbered with the worst one-day percentage drop in nearly eight years for Commonwealth Bank (CBA.AX) after it reported a disappointing first-half profit.

Investors were unnerved by a jump in Commonwealth's bad debt provisions from low levels, and saw it as a bad omen for other banks, which face rising costs of funding as the Reserve Bank of Australia ratchets up interest rates to tame inflation.

"We're seeing markets responding to what the Reserve Bank is saying and the need to slow activity. That has implications for the credit cycle," said Karara Capital investment manager Rohan Walsh.

Bucking the banking trend, however, was Taiwan, where Fubon Financial (2888.TW) led banking shares .TFNI higher on investor hopes the banking sector will soon get the green light soon to invest in the red-hot China market. The main TAIEX share index closed flat.

FED UP NEXT

U.S. Treasuries [US/] barely moved in Asia, keeping the yield on two-year bonds near a four-year low. With markets sensitive to any sign of a slowdown in the U.S. economy, traders set their sights on U.S. retail sales data due at 1330 GMT.