Asian markets' confident mood flags

Tuesday 03:20 GMT Asian stock markets are falling back with Tokyo shares sinking as the yen rebounds after disappointing stimulus measures from the Japanese central bank and government.

Investors are back on the defensive after Wall Street's drop despite an improvement in US consumer spending and income amid fears the rise in spending could be unsustainable as it grew faster than personal incomes.

The MSCI Asia Pacific index is off 1 per cent, with a 2.1 per cent drop in Japan's Nikkei pacing the region's losses. Australia's S&P/ASX 200 is 0.7 per cent lower, and South Korea's Kospi is down 0.6 per cent.

Investors are awaiting a raft of economic news this week and all eyes are on the vital US non-farm payrolls data due to be announced on Friday. The figure is expected to be weak as initial jobless claims, the weekly indicator for unemployment, have been disappointing recently. Figures on manufacturing are also due.

Shares of Japanese exporters are tumbling as investors suspect that Tokyo may be running out of options to counter the slowing economy and the stronger yen. Sony is off 2.2 per cent, Sharp is down 2.8 per cent and Canon is 2.9 per cent lower. Automakers are also slumping, with Toyota Motor falling 1.5 per cent, Nissan Motor shedding 1.4 per cent and Honda Motor off 1.3 per cent.

In Australia, losses are being led by a 1.2 per cent drop for Macquarie while BHP Billiton is down 1.6 per cent and Rio Tinto off 1.4 per cent.

Financials and tech plays are leading the South Korean market's decline. KB Financial is off 1.9 per cent and Woori Finance is down 1.8 per cent, while Hynix Semiconductor has fallen 2.9 per cent and Samsung Electronics has lost 1.3 per cent.

In currency markets, the yen is trading higher against the dollar and the euro with the Bank of Japan's expansion of a special lending programme for banks failing to have much impact. The yen is at Y84.46 per dollar from Y84.62 late in New York, and has risen against the euro to Y106.83 from Y107.14.

The BoJ had faced mounting pressure to loosen policy in recent weeks after it kept its key interest rate at 0.1 per cent and refrained from expanding credit measures at a meeting in early August.

But there is scepticism about the effectiveness of the central bank's latest move and whether it will have any sustained impact on the yen, with the BoJ stopping short of taking aggressive action to halt the currency's climb.

Investor risk appetite has also faltered as the more confident mood seen at the end of last week following reassuring comments from Ben Bernanke ran out of steam.

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US and European government bonds on Monday recouped some of Friday's losses, sending yields lower, as investors digested the Federal Reserve chairman's pledge to take action if the economic outlook deteriorated "significantly".

The 10-year Treasury yield was down 12 basis points at 2.53 per cent, while the 10-year Bund yield was off 8bp at 2.12 per cent.

Stocks in Europe edged lower in a light trading day due to a public holiday in the UK. The FTSE Eurofirst 300 closed 0.1 per cent lower. But US equities suffered, with the S&P 500 almost reversing its gains on Friday, to close down 1.5 per cent.

The S&P 500 fell further after President Obama said he and his economic team had discussed additional steps to promote economic growth, including tax cuts for businesses. His speech failed to address investors' concerns about the slowdown in economic growth.

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