By Chua Kong Ho and Masaki Kondo Nov. 7 (Bloomberg) -- Asian stocks fell for a second day as the slowing global economy drove down commodity prices and Toyota Motor Corp. and Olympus Corp. lowered profit forecasts. BHP Billiton Ltd. sank 5.6 percent in Sydney after crude dipped below $60 a barrel. Toyota tumbled 12 percent, the most since 1987, after predicting the smallest profit in nine years. Olympus retreated 9.4 percent after saying the stronger yen eroded overseas earnings. South Korea's Kospi Index rebounded, led by Shinhan Financial Group Inc. after the central bank cut interest rates for a third time in a month to avert a recession. ``We expected the global economy would weaken, but it's deteriorating much faster than we feared,'' Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd., which manages about $53 billion, said in an interview with Bloomberg Television. ``I didn't imagine Toyota would be forced to lower its earnings forecast by this degree.'' The MSCI Asia Pacific Index sank 1.4 percent to 87.41 as of 2:50 p.m. in Tokyo, adding to yesterday's 6 percent decline. The retreat nearly erased a 9.8 percent rally earlier this week, as investors shifted their concern from the credit crisis to the global slowdown. The International Monetary Fund yesterday predicted the first simultaneous recession in the U.S., Japan and euro region in the post-World War II era. Japan's Nikkei 225 Stock Average fell 3 percent to 8,634.63. Australia's S&P/ASX 200 Index slumped 2.4 percent, led by Rio Tinto Group after Moody's Investor Services downgraded the stock. South Korea's Kospi gained 2.3 percent, reversing a loss of 4.9 percent. Cheung Kong (Holdings) Ltd. drove gains in Hong Kong after HSBC Holdings Plc cut its best lending rate. Losses Narrow Asian equities pared declines as futures on the Standard & Poor's 500 Index rose 1.3 percent on speculation a report today will show the U.S. economy lost the most jobs in October since 2003, bolstering the case for the Federal Reserve to lower interest rates. Futures traders increased bets the Fed will cut borrowing costs by half a percentage point to 0.5 percent. The S&P 500 slumped 5 percent yesterday, posting the biggest two-day drop since 1987, after jobless claims jumped and the shrinking economy crushed earnings at companies from Blackstone Group Inc. to News Corp. Global financing costs fell, driven by cuts in borrowing costs. The rate Australia's banks charge each other for three- month loans slid to 4.99 percent, capping the biggest weekly drop since January 1990. The London interbank offered rate, or Libor, for three-month loans in U.S. dollars sank to 2.39 percent, the lowest level since November 2004. Policy makers in the Asia-Pacific region's five biggest economies, along with Europe, the U.K. and the U.S. have cut interest rates in the past two weeks, led by the Bank of England's 1.5 percentage point reduction yesterday. Lower Earnings Lower borrowing costs and money market rates haven't stopped the flow of companies predicting lower income. Asian companies outside Japan will report a 9 percent decline in profit this year, UBS AG said today, citing a consensus of analysts. That compares with 10 percent growth predicted earlier this year. ``Any hope that Asian earnings could remain resilient in a global recession has proved once again misplaced,'' Niall MacLeod and Aakash Rawat, Hong Kong-based strategists for UBS, wrote in a report, citing estimates compiled by IBES International Inc. Toyota tumbled 11 percent to 3,380 yen, set for its biggest decline since October 1987, after the automaker more than halved its annual profit forecast yesterday, expecting a 68 percent drop from a year earlier. Tighter credit and worsening consumer sentiment drove industry-wide U.S. sales last month to the lowest level since 1991. The yen's 12 percent gain against the dollar and 24 percent appreciation versus the euro this year is also squeezing profit at Toyota and other Japanese exporters. Honda, Nissan Honda Motor, which cut its 2008 U.S. sales forecast this week, fell 9.9 percent to 2,230 yen. Nissan Motor Co., which cut its profit forecast this week and scrapped its dividend plans, slumped 5.5 percent to 430 yen. Auto-parts makers tumbled. Tokai Rika Co., which makes air- bag systems and steering wheels, plunged 18 percent to 840 yen. Denso Corp., the world's largest listed car-parts manufacturer, dropped 18 percent to 1,688 yen. The two companies had the biggest percentage declines on MSCI's Asian gauge today. Olympus, the world's biggest maker of endoscopes, sank 9.4 percent to a six-year low of 1,610 yen, after cutting its full- year profit outlook by 56 percent. Elpida Memory Inc., Japan's biggest maker of computer-memory chips, lost 8 percent to 580 yen, as it reported a fourth- straight quarterly loss. Commodities Slump The worsening economic outlook diminished prospects for commodities demand. Crude oil for December delivery fell to $59.97 a barrel, the lowest since March 22, 2007, before climbing 0.9 percent, to $61.30 a barrel in New York. A measure of six metals traded on the London Metal Exchange dropped 5.1 percent yesterday. Copper lost 6.5 percent, nickel 7.3 percent, and zinc 7 percent. BHP Billiton fell 5.6 percent to A$27.57. Rio Tinto, the world's third-biggest mining company, sank 9.8 percent to A$71.28, after Moody's cut its rating to ``developing'' from ``positive,'' citing falling metal prices and slow asset sales. Nippon Mining Holdings Inc. dropped 10 percent to 263 yen. Woodside Petroleum slid 6.2 percent to A$40.04. Shinhan gained 5.1 percent to 35,900 won, reversing a 6.3 percent intraday loss, while Hana Financial Group Inc. jumped 9.4 percent to 22,050 won. Rate Cut The Bank of Korea reduced the key rate by 25 basis points to 4 percent, the lowest since 2006, adding to 100 basis points of cuts in October. Policy makers are focused on keeping ``the economy from weakening too much,'' Governor Lee Seong Tae said, adding he's prepared to ``take bigger actions if necessary.'' Cheung Kong added 1.6 percent to HK$76.40. Sun Hung Kai Properties Ltd. added 0.7 percent, reversing a 4.6 percent decline. HSBC, the bank with the biggest network in Hong Kong, said it cut its best lending rate in the city by a quarter point to 5 percent. In Singapore, DBS Group Holdings Ltd., the nation's biggest bank by assets, slid 4.5 percent to S$10.60, after third-quarter profit plunged 38 percent because of increased losses on credit- market investments and bad loans. Fujiya Co. surged the most in 30 years in Tokyo, gaining 27 percent to 158 yen, after the Nikkei newspaper reported the Japanese confectioner's biggest shareholder will raise its stake. Neither company confirmed the report. To contact the reporter for this story: Chua Kong Ho in Shanghai at Kchua6@bloomberg.net; Masaki Kondo in Tokyo at mkondo3@bloomberg.net.

Source