Japan's Nikkei fell for a ninth straight day on Monday as concerns about company earnings outlooks weighed on Asian stocks, while oil languished near a six-week low as faith in a rapid economic recovery faded.
The yen was steady against other major currencies, showing little reaction to the resounding weekend defeat of the Japanese ruling bloc of Prime Minister Taro Aso in a key local election.
A strong second-quarter rally, the summer holiday season in the northern hemisphere and resurgent doubts about the strength of the global economy have combined to dull investor appetite for riskier assets such as stocks and commodities.
Oil prices dropped 11 percent last week in their biggest weekly decline since late January amid mounting worries that a economic rebound may not be coming soon to help spur flagging fuel demand. The market has been too optimistic about a global economic recovery later this year, but that now looks unlikely to happen, so oil prices are languishing, said David Moore, a commodities analyst at the Commonwealth Bank of Australia.
U.S. light, sweet crude was up a cent at $59.90 a barrel, within striking distance of Friday's six-week low of
Stocks are also in a steady downtrend.
The Nikkei average <.N225> has now fallen almost 10 percent from its late-June peak, trading down 1 percent on Monday. MSCI's measure of stocks elsewhere in the Asia-Pacific has fared a little better, 8.1 percent below its June peak, but was down 1.4 percent on Monday.
Taiwan's benchmark index <.TWII> led declines, falling 3 percent on concerns an upcoming financial services agreement with China may be delayed, hurting banking shares.
Seoul's KOSPI <.KS11> was also weak, with reports about the ill-health of North Korean leader Kim Jong-il weighing.
Speculation that Kim Jong-il is suffering from pancreatic cancer has negatively affected markets...such news highlights South Korea's geopolitical risks and the one thing that investors hate is any uncertainty, said Lee Kyoung-su, a market analyst at Taurus Investment & Securities.
YEN EYES EQUITIES
The poor run for equities has affected other financial markets, particularly the currency markets.
Equities fell globally last week with U.S. shares falling for the fourth straight week, and the key is whether that will continue, one currency trader said.
The yen had risen on Friday, notching its best weekly gain against the greenback since October, and the dollar rose against other currencies amid fears of weak U.S. corporate profits and fading hopes for a global recovery.
A report showing U.S. consumer sentiment soured in early July also boosted the two currencies on Friday. The dollar and the yen can rise if investors sell risky assets such as stocks and commodities and buy back the low-yielding dollars and yen used to finance those purchases.
The dollar rose 0.1 percent to 92.68 yen, inching away from a five-month low of 91.77 yen hit on trading platform EBS on Friday.
But the dollar dipped against the euro, with the single European currency rising 0.2 percent to $1.3971, regaining some of the ground it lost against the dollar on Friday.
Government bonds have been the main recipient of money flowing out of the equity and commodity markets as investors seek a relatively safe parking place for their cash over the summer.
Yields on two- and five- year Japanese government bonds hit multi-year lows last week and demand remained solid on Monday.
Ten-year Japanese government bond futures held at 138.85, having rallied from a low of 135.47 last month.
(Editing by Kim Coghill)