Asian markets hunker down, fear more bank pain

Major European markets also fell in early trading. London's FTSE 100 dropped 0.2 percent, the German DAX slipped 0.4 percent and the French CAC 40 was down 0.3 percent.
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"Wall Street has been surprisingly resilient, but we don't know if it will last, and we have a lot of U.S. and Japanese earnings to get through," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments. "There are still a lot of question marks left."
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Investors hoping that an end to the credit crisis might be in sight were brought back to earth on Monday when Bank of America Corp., the top U.S. retail bank, showed a 77 percent drop in quarterly profit and regional bank National City Corp. said it was raising $7 billion in capital.
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More bad news from banks could be on the way after Britain's Royal Bank of Scotland announced a 12 billion pound ($24 billion) rights issue to cover a potential 5.9 billion pound write down. Other British banks could follow suit.
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"The whole stock market is twitchy, the financials in particular," said Peter Vann, head of investment research at Constellation Capital Management. "Some of the U.S. banks are definitely going to have some large losses or a considerable reduction in profits because of all the riskier activities."

Although the latest bank woes unsettled investors, the CBOE Volatility Index, a barometer of jitters on the U.S. equity market, showed no new signs of panic. It barely rose, ending Monday with a reading of 20.5, its second lowest close this year.
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Japan's Nikkei stock average closed down 1.1 percent, led lower by blue chip exporters such as Honda Motor Co. Ltd. as a stronger yen prompted investors to lock in profits after the market climbed for five days.
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Stocks across the rest of Asia, measured by MSCI's index, fell 0.65 percent.
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China's benchmark Shanghai Composite Index touched a 13-month low, led by steel and metal-related stocks, as investors were disappointed by weak government measures to bolster the slumping market. The index has fallen by half since last October.
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DOLLAR STRUGGLES
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The continued worries about the U.S. economy and fears of another salvo of bank woes kept the dollar under pressure against the yen and the euro. The slide in Asian stocks prompted investors to trim risky yen carry trades, in which players use the low-yielding Japanese currency to finance purchases of assets offering higher returns elsewhere.
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"Weaker share prices sparked yen buy-backs, while some investors also booked profits on the dollar's recent rise against the yen," said a trader at a Japanese trust bank.

The weak dollar has helped prices for commodities such as oil to hit record highs this year.

But U.S. crude oil prices needed little currency support on Tuesday, remaining close to a record high of $117.83 a barrel hit on Monday after rebel attacks cut Nigerian supplies and a Scottish refinery strike threatened North Sea production.
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The euro also gained after European Central Bank Governing Council member Klaus Liebscher said there was no reason for pessimism on euro zone growth, suggesting the ECB would keep rates at a six-year high of 4 percent for a period.