GLOBAL MARKETS-Asia stocks slide as global outlook darkens
* Asian shares fall 3-5 pct after sell-off on Wall Street
* Oil prices fall to 3-1/2-year low; copper prices fall
* Yen gains limited as Japan investors shift funds abroad
* JGB 10-yr yield falls to 8-mth low on safe-haven buying (Adds comments, European outlook)
HONG KONG, Dec 2 (Reuters) - Asian equities slid on Tuesday after signs of a deepening global economic slump slammed stocks worldwide the previous day, driving benchmark U.S. Treasury yields to their lowest since the 1950s.
European shares were set to drop between 1.5 percent and 2 percent, according to financial bookmakers.
Adding to the gloom, the U.S. economy was confirmed to have fallen into a recession nearly a year ago and Federal Reserve Chairman Ben Bernanke said the central bank is mulling extreme policy measures such as buying government bonds to revive growth. [ID:nN01516053]
An array of reports showing manufacturing activity around the world contracted at the sharpest pace in a decade or more put focus on the pain the credit crisis has inflicted on companies and households. [ID:nN01439823]
"Investors knew the economy was bad, but a series of economic indicators showed it had deteriorated far more than expected," said Soichiro Monji, a chief strategist at Daiwa SB Investments. "It's become clear that it's not just the United States but everyone."
The MSCI index of Asia-Pacific stocks outside Japan .MIAPJ0000PUS dropped about 4.5 percent, taking this year's losses to nearly 60 percent.
Safe-haven bonds attracted funds, with solid demand at a 10-year Japanese government bond auction helping drive their yields to an eight-month low. Oil prices fell to a 3-1/2-year low on the dour outlook for global demand, while the yen gained on the flare-up of risk aversion.
Global central banks are slashing rates and unveiling new steps to unclog credit markets and contain the economic damage from the 15-month crisis.
The Reserve Bank of Australia chopped rates by a full percentage point to 4.25 percent on Tuesday, a 6-1/2-year low. The Bank of Japan widened the types of corporate debt its accepts in money market operations to bring down steep borrowing costs. [nSYD115800]
Japan's Nikkei average .N225 tumbled 6.4 percent as the yen's surge added to the pain for the country's big exporters, that have suffered a double-whammy from tumbling demand and currency strength shrinking the value of overseas earnings.
The Reuters Tankan survey of confidence at big Japanese manufacturers, a proxy of the BOJ's quarterly poll, posted its biggest one-month fall on record in November. [JP/TAN1]
On Monday, the S&P 500 index .SPX tumbled 8.9 percent, with investors set to ride out a tumultuous 2008 on a rocky note.
BATTERED MARKETS
U.S. crude oil prices CLc1 fell nearly $2 to $47.58 a barrel, its lowest since May 2005, extending Monday's drop.
The yen recovered from an initial dip as Japanese investors took advantage of the rise to buy higher-yielding currencies for cheaper. Data from Ministry of Finance has showed Japanese investors have been steady buyers of foreign stocks since September.
The dollar slipped 0.1 percent from late U.S. trade to 93.17 yen JPY=, off a session high of 93.82 yen and has retreated back near a 13-year low hit in October. The euro was down 0.1 percent at 117.52 yen EURJPY=R.
The yen's fortunes remain closely tied to that of stocks due to its role in the carry trade -- using the low-yielding Japanese currency to buy higher-yielding currencies and other assets.
The Australian dollar took a hit from the big RBA rate cut and tumble in commodity prices. The Aussie was down 2 percent at $0.6343 AUD=D4.
Safe-have government bonds climbed as investors sought a refuge from the volatility.
The yield on 10-year Japanese government bonds JP10YTN=JBTC dropped 5 basis points to 1.350 percent and hit a low of 1.345 percent, the lowest since April.
U.S. Treasuries pushed up in Asia, with the benchmark 10-year note US10YT=RR rising 6/32 in price to yield 2.707 percent -- near a five-decade low of 2.650 percent hit on Monday after Bernanke said the Fed could start buying Treasuries and agencies.
The Fed is widely expected to cut rates later this month to 0.5 percent, the lowest since the 1950s, and Bernanke said lower rates are feasible but conventional policy is constrained.
Long-term government bond yields have also dropped on mounting expectations inflation in major economies will turn into falling prices, or deflation. (Additional reporting by Elaine Lies in Tokyo; Editing by Dhara Ranasinghe)
