HONG KONG (Reuters) - Investors sold financial stocks and the dollar on Thursday as concerns about two top U.S. bond insurers' credit ratings reinforced fears about the health of the U.S. economy.
Speculation on financial television network CNBC that credit rating firms would downgrade Ambac Financial Group Inc and MBIA Inc pushed both down more than 10 percent, drowning out the cheers for Wednesday's 50 basis point interest rate cut by the U.S. Federal Reserve.
The Dow Jones industrial average closed down 0.3 percent, returning to a downward path after a flicker of support following the rate cut, which came hard on the heels of an emergency 75 bp cut eight days before.
Most Asian stockmarkets started the day slightly lower, but MSCI's measure of Asia Pacific stocks excluding Japan was flat at 0149 GMT, as South Korean traders found some buying opportunities amid the gloom.
"The U.S. market reacted more to negative news as a half-percentage-point (Federal Reserve) rate cut had been already factored in," said Naoki Koga, senior fund manager at Toyota Asset Management.
"But as the Fed will likely keep lowering rates in the future, investors may soon see that as positive and that will be good for the market."
A Reuters poll showed 15 out of 16 primary dealers on Wall Street surveyed after Wednesday's rate cut expect the central bank to trim rates again at its next meeting in March.
Expectations of lower U.S. rates weighed on the dollar, which hit an all-time low against the Swiss franc at 1.0814 franc on electronic trading platform EBS in early Asian trade before recovering to 1.0840 franc. Against the yen, it slumped towards 106 before recovering to 106.5.
Crude oil prices, which had risen past $92 a barrel on Wednesday and would normally gain from a weaker dollar and a helping hand from the Fed, fell as far as $90.80 and stood at $91.10, $1.23 down on the day.
Safe-haven gold rose slightly to $925.25/6.00 an ounce, just shy of the record $933.10 set on Tuesday.
SHIPS AND CHIPS ON THE DIPS
Seoul's main KOSPI rose 1 percent, with battered shipbuilders such as STX Pan Ocean seen as oversold and cheered by a 5 percent jump in the Baltic Exchange's dry freight index on Wednesday. Chip makers also rose on stabilising DRAM memory chip prices.
"Markets in Asia fell quite a bit on Wednesday before the Fed meeting, preceding a Wall Street fall, so we are seeing some interest from investors buying on dips," said Kang Mun-seok, an analyst at Korea Investment & Securities.
"But the first quarter will continue to be rocky as more negative news from the subprime mortgage crisis will be unearthed."
Japan's Nikkei average and the broader TOPIX were rose about half a percent, although top bank Mitsubishi UFJ Financial Group (MUFG) and other bank stocks fell on worries about the U.S. bond insurers.
Japanese government bonds rose to track a rally in U.S. Treasuries after the Fed's latest cut, while recent weakness in Tokyo shares also spurred buying of safe-haven government debt.
"The JGB market continues to take its cue from stocks, but it's mainly driven by incentives to earn quick profits from dealings rather than investment based on a clear conviction that the Bank of Japan will cut interest rates," said Naomi Hasegawa, a senior fixed-income strategist at Mitsubishi UFJ Securities.
In Australia, the benchmark S&P/ASX 200 index levelled out after an early slip as investors bought into talk that the world's two biggest miners, BHP Billiton Ltd and Rio Tinto Ltd , might be able to negotiate a friendly merger.
