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Asian Markets Decline on Lehman Fears, Oil Gains

Asian stocks weakened Wednesday, hurt by financial shares ahead of results from Lehman Brothers, which has been rocked by the same crisis that led Washington to take over Fannie Mae and Freddie Mac this week.

Lehman will report its quarterly results ahead of the U.S. stock market open.

Oil prices rose toward $104 a barrel, reversing earlier losses, after OPEC agreed to return to its 2007 production target, an effective cut in output. But crude remains close to $100, below which Goldman Sachs said earlier this week could signal a global recession. A retreat in oil prices from a record high in July has supported the U.S. dollar, which hit an 11-month high against the euro on Tuesday.

While the U.S. government bailout of its top mortgage finance companies has removed a big risk of a system-wide failure, problems at other financial institutions were painful reminders of how severely an avalanche of bad loans has threatened almost every major economy.

Japan's Nikkei 225 Average finished 0.4 percent down, led lower by blue-chip exporters like Canon on concerns about the global economic outlook and a stronger yen. A fall in oil prices dented energy shares including oil and gas explorer Inpex Holdings and trading house Mitsubishi Corp. But banks, including industry leader Mitsubishi UFJ Financial , rose sharply, ahead of Lehman Brothers' release of "key strategic initiatives" and quarterly results due later in the session.

South Korea's KOSPI closed higher after initially losing up to 1.7 percent earlier in the session, with Hynix Semiconductor gaining on prospects for a stake sale and investors shrugging off reports North Korea's leader was gravely ill. But some banking issues including Woori Finance Holdings and Shinhan Financial Group dropped after a local media report that Korea Development Bank (KDB) was still seeking to buy a controlling stake in Lehman Brothers.

Australian shares fell 1.5 percent, as miners slid on falling metals prices and banks fell on fresh worries about U.S. banks' ability to cope with mortgage losses.

Hong Kong shares dropped 2.4 percent as commodity-linked stocks were walloped by falling oil prices and Chinese property shares slumped on more broker downgrades following grim August sales figures. China Overseas Land tumbled 11.5 percent after its sales revenue in August fell 40 percent from July and 28 percent from the same month last year. China's once red-hot property market has been faltering since the end of last year as the economy shows signs of slowing, cooling speculative purchases in high-end urban areas.

Singapore's Straits Times Index was down 1.6 percent with banks leading the losses. China's Shanghai Composite Index rebounded, up 0.2 percent as blue chips were bought across the board after slightly better-than-expected consumer price inflation data. But while turnover rose from Tuesday's very low levels, it stayed thin, and analysts said it was not clear that any extended recovery of the stock market was starting, given concern about slowing corporate profit growth and heavy supply of fresh equity.