* MSCI Asia ex-Japan falls to fresh six-month lows
* Nikkei ventures into bear market territory
* Volatile Nikkei keeps dollar jittery vs yen
* European shares likely to edge higher
By Chikako Mogi
TOKYO, June 7 Japanese equities plunged to
two-month lows on Friday, with the yen rising against the dollar
as investors fretted over U.S. jobs data due later, while
constant market agonizing about the Federal Reserve's stimulus
plans drove Asian shares to fresh 2013 lows.
The Nikkei average shed as much as 2.8 percent and
entered bear market territory earlier, having lost 20 percent
from a 5-1/2 year high reached two weeks ago. The Nikkei ended
down 0.2 percent, closing at its worst week in over two years.
Worries the U.S. nonfarm payrolls will undershoot
expectations prompted investors to cut long positions that had
been profitable for months, particularly those betting on the
dollar to rise against the yen as the U.S. economy recovers, and
those buying Japanese stocks on hopes a weaker yen will underpin
Asian shares failed to capitalise on an overnight gain in
Wall Street as investors sought to square their positions before
the payrolls data. The job numbers may shed new light on whether
the Fed is likely to taper its $85 billion a month stimulus
programme in coming weeks.
MSCI's broadest index of Asia-Pacific shares outside Japan
fell 0.8 percent to its lowest since late
November, putting it on course for its worst week in more than a
year with a 3.2 percent decline.
Frances Cheung, Credit Agricole CIB's senior strategist in
Hong Kong said the Fed uncertainty was making investors
extremely nervous. "There is divergence across asset classes.
It's really difficult to pin down the impact."
European stock markets are likely to edge higher, with
financial spreadbetters predicting London's FTSE 100,
Paris's CAC-40 and Frankfurt's DAX will open up
around 0.6 percent. A 0.1 percent drop in U.S. stock futures
pointed to cautious Wall Street start.
Australian shares hit a 4-1/2-month low while South
Korean shares slid 1.8 percent, pulled down by a tumble
in heavyweight Samsung Electronics. Chinese shares
After falling 2 yen from session highs to a two-month low of
95.55 yen, giving up all gains made since the Bank of
Japan's unprecedented stimulus unveiled on April 4, the dollar
crawled back up to trade around 96.35 yen. It was down 0.15
percent against a basket of six major currencies, holding
above its lowest since Feb. 25 of 81.077 hit on Thursday.
BLAME RISING YIELDS
Takao Hattori, senior investment strategist at Mitsubishi
UFJ Morgan Stanley Securities in Tokyo, said market players may
be shifting their focus to higher bond yields. U.S. bond yields
are rising and prices are falling on speculation about an
eventual unwinding of the U.S. stimulus, while Japan's bold
monetary stimulus has helped eased appetite for safe-haven
German bonds. Japanese government bond yields have also faced
"Recent yield increases has brought about an unintentional
tightening environment, lessening the degree of effectiveness
from monetary stimulus provided by major central banks. This may
be starting to unnerve markets," Hattori said.
European Central Bank President Mario Draghi said on
Thursday further monetary support was unlikely in the near
future, noting that the ECB was technically ready for negative
deposit rates but there was no reason to act right now.
Corrections have been far deeper for Japanese stocks and the
yen as the Nikkei had surged over 80 percent from mid-November
to last month's peak while the yen had slumped 30 percent
against the dollar in the same period, when speculators boosted
their bets that Prime Minister Shinzo Abe will pursue strong
Market turmoil accelerated and then crushed Japanese stocks
as "Abenomics" - monetary easing, fiscal spending and growth
strategies - failed to live up to blown-out market expectations,
triggering a wave of yen selling and Nikkei buying, all weighing
on broader Asian bourses.
"It's not what Abe has announced that I am sceptical about.
It's the way that policy is being directed and executed. It's
the fact that Abe's 'three arrow' policies have been directed
more towards changing expectations than reality," said
Robert Rennie, head of currency strategy at Westpac, in a note.
U.S. crude futures steadied at $94.83 a barrel while
Brent was up 0.1 percent to $103.71.
"Investors should look at dollar trades more than
supply-demand factors for oil," said Tetsu Emori, a commodity
fund manager with Astmax Investments in Tokyo.
"In the long-term I agree that the dollar will strengthen as
the Fed rolls back stimulus, but for now the dollar seems
overbought and we are seeing some unwinding of positions."