Asian markets decline after U.S. outlook cut by the Fed (AP) (21-05-2009)

HONG KONG (AP) -- Asian stock markets retreated on Thursday after the U.S. central bank predicted an even deeper recession in the world's largest economy and as investors grow more cautious after the big advances of recent months.

Investors across the region were scaling back risky bets on stocks after the Federal Reserve cut its outlook for all of 2009, saying America's economy could shrink between 1.3 and 2 percent compared to the prior estimate of 0.5 and 1.3 percent. In an ominous sign for Asian exporters that rely on U.S. consumer demand, the Fed policymakers said the unemployment rate could approach 10 percent.

Japan's Nikkei 225 stock average lost 111.74 points, or 1.2 percent, to 9,232.90, and Hong Kong's Hang Seng shed 159.35 points, or 0.9 percent, to 17,316.49.

Elsewhere, South Korea's Kospi dropped 1.1 percent to 1,420.34. Shanghai's index fell 1.1 percent, Australia's was off 0.5 percent while Taiwan rose 0.1 percent.

The Fed's outlook, contained in minutes of its recently policy meeting released Wednesday, reined in optimism on Wall Street, with banks taking the brunt of the selling.

Oil prices eased off six-month highs in Asia, with benchmark crude for July delivery down 45 cents to $61.59 a barrel. On Wednesday, the July contract rose $1.94 to settle at $62.04 after the government said U.S. crude inventories fell for a second week, suggesting demand may be improving.

The dollar weakened to 94.51 from 94.58. The euro was lower at $1.3770.

Source: AP