HONG KONG (Reuters) - Asian stocks slipped and the U.S. dollar drifted higher on Friday, as investors braced for the December U.S. payrolls data, expected to show sharp job losses and deal another blow to hopes for a speedy recovery this year.The world's largest economy probably shed more than half a million jobs last month, bringing job losses in 2008 to a post-war record, boding ill for Asia's struggling exporters who have been starved of demand from developed nations.
Global equities, emerging market currencies and high-grade credit had all benefited in the last month from a steady improvement in investors' risk tolerance. However, dour corporate outlooks, including from the world's top retailer Wal-Mart, and prospects for higher unemployment have curbed appetite for riskier assets.
"What gave the latest rally legs has been the support of institutional investors. Now, as they are once more on the sidelines there must be a danger that the gains will be reversed," said analysts with State Street Global Markets in a note.
"The message from investors is that even though the world may not face an existential crisis, the wrecking ball of deleveraging and unprecedented financial and economic dislocation will cause further damage yet," said the analysts, who track 15 percent of the world's tradeable assets.
The MSCI index of stocks in the Asia-Pacific region outside Japan (^MIAPJ0000PUS - News) edged 0.5 percent lower, creeping further away from a one-month high reached on Wednesday.
Japan's Nikkei share average (Osaka:^N225 - News) fell 0.8 percent, with big exporter stocks such as Honda Motor Co (Tokyo:7267.T - News) and Canon Inc (Tokyo:7751.T - News) among the biggest drags on the index.
AGGRESSIVE ACTION
South Korean stocks were the region's biggest decliners, with the benchmark KOSPI (KSE:^KS11 - News) down 1.8 percent after the country's central bank cut interest rates by 50 basis points to a record low and warned Asia's fourth-largest economy would slow further.
"The Bank of Korea has no choice but to cut interest rates, given a slowing economy. The economy probably contracted in the fourth quarter and the first quarter is seen worse," said Park Sang-hyun, chief economist with HI Investment & Securities in Seoul.
Policymakers in China, India and Korea were the most aggressive in Asia in trying to protect their economies as the worsening global downturn really bit into the region in the second half of 2008.
But other Asian countries have lately had to step up their actions with export sectors gutted, domestic growth crippled and bank lending still sluggish. Taiwan unexpectedly slashed rates and Indonesia eased by more than forecast this week.
Bond market investors meanwhile have been more focused on new global bond issuance, hungry for higher yields, particularly with credit markets showing signs of stabilization.
U.S. corporate debt proceeds of $19.9 billion in the first full week of 2009 were the highest since May 2008, according to Thomson Reuters data, as companies took advantage of the window of calm in capital markets to push through deals.
The budding enthusiasm has slowly peeled money away from U.S. Treasuries. The benchmark 10-year Treasury note yield was steady at 2.45 percent, but has climbed around 40 basis points since hitting a five-decade low late in 2008.
The 30-year bond yield edged up to 3.04 percent, up 1 basis point from late New York trade.
Japanese government bond futures ticked up 0.28 point after hitting a 1-month low on Thursday.
The dollar was little changed at 91.15 yen. The dollar had hit a one-month high around 94.65 yen on Tuesday.
The euro fell 0.2 percent to $1.3677. The euro has bounced between $1.3964 and a three-week low of $1.3312 this week.
U.S. light crude oil for February delivery climbed above $42 a barrel, up 2 percent, as dealers tried to find a floor, thinking most of the bad news has been priced in.
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