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Oil Prices, Economic Fears Hit Asian Markets

Asian markets fell Monday as a rebound in oil prices to above $126 revived inflation concerns at a time when major economies such as the U.S. and Japan are already seen headed for tough times. Japan lost 1.2 percent while South Korea fell almost 2 percent.

A steep quarterly loss at U.S. auto maker General Motors and a contraction in U.S jobs announced on Friday spell trouble for Asian manufacturers which rely heavily on U.S. demand.

Slowing demand from the world's largest economy is taking a toll on the global economy. Data due to be released later this week is expected to show Japan's economy probably shrank 0.6 percent in the second quarter, ending three consecutive quarters of expansion.

Adding to global growth woes was a rebound in the price of oil as concerns over Iran's nuclear activities, violence in OPEC member Nigeria and a tropical storm in the Gulf of Mexico sparked concerns over supply. Oil had tumbled last month on concerns that record prices were dampening energy demand. U.S. light crude for September deliver was trading at the $126 level in the Asian session, still below the record above $147 a barrel hit on July 11.

The U.S. dollar dipped against the yen but held near Friday's five-week high against the euro as investors sold other major currencies amid mounting evidence that the U.S. credit and housing woes are spreading to other parts of the world.

Japan's Nikkei 225 Average fell 1.2 percent to a two-week closing low as carmakers slid on weak U.S. auto sales data, with Nissan Motor hit also by a drop in profit.

South Korea's KOSPI closed 1.9 percent down as shipbuilders tumbled on news of cancelled orders after some shipping companies failed to make pre-payments. Daewoo Shipbuilding and Marine Engineering cancelled a 619 billion won ($609.4 million) order to build eight container ships for an unidentified European company. Exporters such as Hyundai Motor and LG Display were also weaker after a U.S. government report showed that U.S. employers cut jobs for the seventh straight month in July, stoking anxieties about South Korea's second-largest export market.

Australian shares finished 0.2 percent lower as falling metals prices pressured top miners, while property developer Lend Lease dropped on a profit warning. But clothing retailer Just Group surged as it surrendered to a hostile takeover bid from billionaire Solomon Lew, recommending the A$810 million offer if it was declared unconditional. Asciano, Australia's biggest port and rail operator, also rallied up over 14 percent, after it said it had received an unsolicited bid worth around A$2.9 billion (US$2.7 billion) from a group comprising TPG Capital and Global Infrastructure Partners.

Hong Kong shares fell 1.5 percent, with bleak jobs data from the U.S. intensifying recession worries, and higher oil prices likely to corrode company profits. Container and port operators fell on increasingly negative forecast from analysts, driven by weakening Asia-Europe demand in recent times. The Baltic Dry Index, which gauges changes in the price of shipping commodities, has been on the decline for more than 3 weeks, giving up 11 percent since July 10. Cosco Pacific, the world's fifth largest container port operator fell 4.9 percent while China Shipping Container Lines dropped 4.2 percent, adding to last week's 15 percent fall.

Singapore's Straits Times Index was down 1 percent. Singapore-listed shipbuilders tumbled after news of order cancellations from Korean shipbuilders sparked concerns that the shipbuilding cycle may have peaked in the first half of 2008, dealers said. Shares of South Korean shipping firm STX Pan Ocean plunged as much as 6.1 percent to hit a four-week low of S$2.46, with over two million shares changing hands.

China's Shanghai Composite Index slipped 2.1 percent in tiny turnover as the market remained weighed down by concern about slowing economic growth. Steel shares, which have been sliding since early last week because of concern that a slowing economy could dampen product prices, led the drop. Industry leader Baoshan Iron & Steel lost 3 percent after falling over 7 percent last week.