Asia stocks fall for second day on dismal outlook

By Eric Burroughs

HONG KONG (Reuters) - Asian shares fell for a second day on Wednesday and oil prices hovered near a 20-month low as poor corporate earnings highlighted the damage from the global economic slowdown on companies and consumers.

The yen surrendered gains as Asian markets held up better than Wall Street, with Japan's Nikkei average dipping 1.3 percent on the lightest volume in about six weeks. Shares of commodity-linked companies led the drop.

Financial bookmakers called for a rise in European shares of nearly 2 percent, but analysts confessed that investors had few reasons to be optimistic.

"The worst of the financial crisis may be over, but we now face this problem that we don't know how much worse the economy will deteriorate and where it will find a floor," said Koichi Ogawa, a chief portfolio manager at Daiwa SB Investments in Tokyo.

Among the bleak news on Wednesday, Japanese consumer confidence in October slid to the lowest since records began in 1982. In South Korea, job growth weakened to a 3-1/2-year low.

"The news is very, very bad. It's bad because there is a global recession," said Jan Lambregts, head of Asia research at Rabobank in Hong Kong. "We still have a couple of tough quarters, and even then the recovery will not look good."

The MSCI benchmark index of Asian stocks outside of Japan lost 0.8 percent. On Tuesday the S&P 500 shed 2.2 percent on news of faltering demand at aluminium maker Alcoa and a dismal outlook from conglomerate Tyco International.

Trading activity remained sluggish as many investors stuck to the sidelines, choosing to sit out the final months of what's been a brutal year as they try to assess how deep a recession the global economy faces.