GLOBAL MARKETS - Asian shares slide on U.S. worries, yen firms

By Jacqueline Wong

SINGAPORE (Reuters) - Asian stocks slid on Friday led by financial companies and exporters on renewed worries about the health of the U.S. economy, and investors took cover in the relative safety of government bonds, sending yields lower.

The yen rose against the dollar as investors reversed bets that involved selling the low-yielding Japanese currency, as weaker Asian equities quelled demand for risky investments.

Oil prices were little changed, having fallen below $94 a barrel after a surprise rise in U.S. crude inventories eased supply concerns, and is now about 5 percent below the record-high of $98.62 a barrel achieved on Nov 7.

Gold revived after falling 3.5 percent to a two-week low the previous day.

Financial bookmakers in London expect the FTSE 100 index to open 30 to 36 points lower, Frankfurt's blue-chip DAX to open 52 to 68 points down and Paris' CAC-40 to fall 24 to 52 points.

Tokyo's Nikkei average ended 1.6 percent lower, taking its cue from U.S. stocks which sank on Thursday on worries that credit losses from mortgage defaults were mounting.

MSCI's measure of other Asia Pacific stocks shed 2.2 percent by 0610 GMT.

The index has fallen about 10 percent from the Nov. 1 record high, but is still up 34 percent this year, about four times the gains for global stocks.

"The big banks keep coming out with losses and that keeps the wind blowing on the negative, which leads to further concerns out of the U.S.," said Greg Goodsell, equity strategist at ABN AMRO.

Worries about the U.S. economy grew after the chief executive of No. 2 U.S. mortgage lender, Wells Fargo & Co, said the U.S. housing slump was far from over and was the worst since the Great Depression in the 1930s.

China stocks fell 1.8 percent as investors awaited a widely expected rate hike from China's central bank to rein in inflationary pressures, while Hong Kong shares dropped nearly 4 percent on news China's southern city of Shenzhen would cap bank withdrawals to curb the flow of funds to the territory.

Shares markets in South Korea, Australia and Singapore were all down around 1 percent. Taiwan fell 1.6 percent.

BANKS DENTED, BONDS RISE

Investors sold bank stocks on credit worries, knocking the MSCI index for regional banks down 2 percent.

Japan's second-largest banking group Mizuho Financial Group slid 2.6 percent and No. 1 Mitsubishi UFJ Financial Group slipped 2.9 percent. National Australia Bank Ltd dropped 4.2 percent as it traded ex-dividend.

Japanese exporters were also hit by the stronger yen as investors worry that the rising currency would mean weaker profits from overseas sales. Canon Inc, Sony Corp and Honda Motor all fell more than 1 percent.

Mining giant BHP Billiton ended unchanged, having risen as much as 1.6 percent after the Wall Street Journal reported that Rio Tinto was fighting off its unsolicited bid by considering a counterbid for the world's biggest miner.

With tumbling stock markets, investors scurried to safe-haven government bonds, sending the yield on the benchmark 10-year Japanese bond down 2.5 basis points to 1.470 percent and touched a 22-month low of 1.460 percent earlier.

But yield spreads between emerging market debt and U.S. Treasury notes , a key gauge of risk aversion, blew out 7 basis points after a similarly sharp move the previous session.

The fall in risk appetite helped support the yen, which picked up from an early fall. The dollar fell 0.3 percent to around 110.00 yen , keeping within sight of 18-month lows of 109.10 yen set this week.

The euro slipped a touch to $1.4610 , staying on the back foot against the dollar on expectations that euro zone economic growth may slow, while the European Central Bank remains determined to fight the risk of higher inflation.