International Herald Tribune

Asian stocks fell Wednesday, with regional shares outside of Japan hitting a 17-month low, on the growing risk of a sharp global economic slowdown.

The dollar hovered near six-month highs against a basket of major currencies, with investors watching oil and stock markets for direction.

Data showing Japan's economy contracted in the second quarter added to a sense of unease about growth prospects and reinforced concerns that the world's second-largest economy may have slipped into a recession.

Also, credit woes showed no signs of ending after a year, with JPMorgan Chase saying on Tuesday that it chalked up $1.5 billion in losses so far this quarter on mortgage-related assets.

'Fresh credit worries and the subsequent share falls on Wall Street are weighing on sentiment,' said Hwang Geum Dan, a market analyst at Samsung Securities in Seoul.

'Despite oil's falls, investors remain cautious as concerns about fundamentals such as economies and corporate earnings pervade the markets.'

The Nikkei 225 share average in Japan fell 2.2 percent, led lower for a second day by shares of the clothing company Fast Retailing.

Japan's economy shrank 0.6 percent in the second quarter, as expected, ending the longest period of expansion since World War II. Economics Minister Kaoru Yosano said the economy could shrink further but a contraction would not last long.

Stocks elsewhere in the Asia-Pacific region slid about 1.6 percent to the lowest since March 2007, according to an MSCI index. The index has fallen 32 percent since hitting an all-time high last November.

The Hong Kong Hang Seng Index fell 1.7 percent, dragged down by shares of China Mobile, which hit their lowest in almost a year on worries the company's bottom line is vulnerable to slower growth.

The South Korean Kospi slipped about 1 percent, with technology heavyweights Samsung Electronics and LG Electronics leading the way lower.

Crude oil prices and the U.S. dollar continued to trade closely together, with a decline in one coinciding with a rise in the other.

Analysts say oil prices remain one of the biggest uncertainties as to whether the dollar's 10 percent rise against the euro since mid-July is sustainable.

'We remain wary of any rebound in oil and commodity prices as it could trigger a partial reversal of recent moves,' Brian Kim, currency strategist with UBS in Stamford, Connecticut, said in a note.

'Although markets have moved quickly, we expect further consolidation of new ranges up ahead and shift our euro/dollar forecasts to $1.51 and $1.47 for 1 month and 3 months, respectively,' he said.

The euro edged up 0.1 percent to $1.4925 after hitting its lowest since February at around $1.48 on Tuesday. Against the yen, the dollar fell 0.4 percent to ¥108.80, moving further away from a seven-month high above ¥110 hit on Monday.

The September U.S. light crude contract nudged up to $113.25 a barrel, off a three-month low of $112.31 hit Tuesday.

Despite crude's small comeback, there are growing signs of a significant drop in energy demand from the world's top consumers of oil.

U.S. crude demand in the first half fell by the most since 1982, a government report showed. That data followed a report on Monday that said July crude imports by China fell by a surprising 7 percent to a seven-month low.