Asian stocks teetered Tuesday, snuffing a five-day rally as uncertainty about U.S. banks pushed dealers to take profits on recent gains, while investors' reduced willingness to take risks lifted the U.S. dollar and yen.
Gloomy comments from high-profile U.S. bank analysts overnight, as well as a dark prognosis on the financial system from billionaire investor George Soros, weighed on Wall Street and supported gold prices.
Adding to unease about the financial sector, the International Monetary Fund is expected to report in coming weeks that a deterioration in U.S. bad assets could increase to as much as $3.1 trillion, far more than the $2.2 trillion the institution had earlier forecast, The Times newspaper reported in Britain.
The Bank of Japan unveiled further steps to ease credit strains, as the global financial crisis pushes the world's No.2 economy into its worst postwar recession. The BOJ kept interest rates unchanged at 0.1%.The Reserve Bank of Australia, cut interest rates by 25 basis points to 3 percent.
The yen and the dollar climbed, benefiting from defensive position-taking as the optimism that powered a recent rally in stocks and higher-risk currencies gave way to caution about banks. The dollar strengthened against the euro but weakened against the yen . Oil prices fell sharply to trade above $51 a barrel .
Japan's Nikkei 225 Average fell 0.3 percent in seesaw trade, with drops in financial shares amid resurgent fears about their overseas peers outweighing gains in carmaker stocks. Investor jitters ahead of Japan's corporate results season led to selling of Hitachi Construction and other shares likely to report losses, while profit-taking after recent sharp gains also weighed on the market.
South Korea's KOSPI finished 0.17 percent higher in volatile trade, rising for a sixth straight session with gains led by some technology and auto issues, but declining financials weighed on the index.
Australia's S&P/ASX 200 Index fell 1.3 percent, dragged down by global miner Rio Tinto on more output cuts and persistent market talk of a potential rights issue if a Chinese investment falls through. The market shrugged off a 25 basis point interest rate cut from the Reserve Bank of Australia, which was not as big as some investors had hoped for.
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Hong Kong shares retreated 0.5 percent, after piling on nearly 11 percent in a three-day rally, as many of last week's big gainers pulled back while turnover continued to shrink as investors turned wary amid a lack of fresh news. PCCW shares stayed in the black after opening lower on market views its long-impending buyout was one step closer to completion, despite the appeal against the court's approval of its privatization plan.
Singapore's Straits Times Index fell 2.6 percent. Financials were on the decline with UOB and DBS Group both down around 4 percent.
China's Shanghai Composite Index was up 0.8 percent. Turnover shrank as investors became more cautious with the main index near important technical resistance. Coal shares continued to outperform on hopes for an economic recovery, and medical shares surged after news on health care reform. Shinva Medical Instrument surged 5 percent while Renhe Pharmacy advanced 8 percent.