HONG KONG (Reuters) - Asian stock markets and commodities retreated on Tuesday while the yen pushed higher as a souring economic outlook took some of the wind out of investor hopes sparked by China's massive stimulus plan.
Stocks pulled back after shares of General Motors (GM.N: Quote, Profile, Research, Stock Buzz) sank to a 62-year low and brokerages forecast that Goldman Sachs (GS.N: Quote, Profile, Research, Stock Buzz) will post its first-ever quarterly loss, stirring worries about the earnings damage to come as the global economy faces a recession.
The bankruptcy of No. 2 U.S. electronics retailer Circuit City CCTYQ.PK also dashed the previous day's optimism.
"Disappointment over U.S. markets' muted reaction to the China economic stimulus package dampened investor appetite, with technology exporters leading falls after the Circuit City bankruptcy news," said Won Jong-hyuck, a market analyst at SK Securities.
China's announcement that it was planning a nearly $600 billion package focusing on infrastructure, along with expectations U.S. President-elect Barack Obama will push for more fiscal spending, spurred investor risk-taking on Monday.
Investors have grappled with whether the drop in shares now reflects enough the expected downturn in economic growth and corporate earnings that drove the broad MSCI index of Asian markets outside of Japan to a 4-1/2-year low last month.
The MSCI Asia ex-Japan .MIAPJ0000PUS fell 3.1 percent but is still up about 24 percent from the low struck in October when investors dumped assets across the board to raise cash, hitting higher-yielding currencies and commodities as well.
Japan's Nikkei average .N225 shed 3.3 percent to 8,781.45 after having jumped nearly 6 percent the previous day.
The Shanghai Composite Index held up better than other markets, dipping 0.3 percent after having posted its biggest one-day gain since September on Monday. Hong Kong's Hang Seng .HSI drifted down 0.5 percent.
Companies such as Japan's Hitachi Construction Machinery .6305.T climbed for a second day on hopes that China's big spending to help underpin its slowing economy would provide a boon of new orders.
In commodities, U.S. crude oil prices fell $1.68 a barrel to $60.73, back near a 1-1/2-year low struck last week.
The yen edged up slightly, gaining as market players cut positions favoring higher-yielding currencies that tend to perform better when stocks rise and investor appetite for risk improves.
The dollar dipped 0.2 percent from late U.S. trade to 97.85 yen, while the euro was down 0.4 percent at 124.50 yen.
Activity in currencies was relatively muted compared with the sharp swings seen in some higher-yielding currencies against the yen over the past month.
With year-end approaching, market players said they were bracing for more hedge fund selling to raise cash holdings and prepare for investor redemptions.
The sharp sell-off across financial markets in October was driven in part by funds selling assets to boost cash holdings, especially with money markets remaining under such severe stress.
"We are in a period in which foreign investors including hedge funds prepare for their year-end and raise their cash holdings," said Minoru Shioiri, chief manager of forex trading at Mitsubishi UFJ Securities.
"The yen could rise further if there are more funds rushing to liquidate positions, but the peak may have passed for now," Shioiri said.
Safe-haven bonds benefited from the drop in stocks. Japanese government bond futures edged up 0.30 point to 137.50, while the gains pushed the benchmark 10-year Japanese government bond yield down a basis point to 1.515 percent.
U.S. bond markets were closed for the Veterans Day holiday, but U.S. stock markets will be open as normal.
