Asian markets' rebound fizzles

Persistent worries about the state of the US economy overwhelmed an early rebound in Asian stock markets on Thursday, with many turning lower as afternoon trading began after morning gains driven by bargain-hunting and a firmer dollar.

The MSCI Asia Pacific Index slid 0.7 per cent to 144.03 by lunchtime in Tokyo, after earlier gaining as much as 1 per cent.

Spot gold rose by nearly half a per cent to $881.03 per ounce by lunchtime in Hong Kong, but was still well short of Monday's lifetime high of $914.

Japanese stocks were pushed lower as the yen strengthened slightly and exporters slipped.

The broad-based Topix index dropped 0.3 per cent to 1,298.59 - its first fall below 1,300 since September 2005. The Nikkei 225 dipped into negative territory early in the afternoon session but then recovered to trade 0.8 per cent higher at 13,610.19.

The yen was trading around Y106.9 to the dollar after falling back into 107 territory overnight.

Nippon Paper shares shed 2.6 per cent to Y299,000 and the Topix paper and pulp index lost 2.1 per cent following a report that Nippon Paper Group's president may step down after the company was found to have fabricated the volume of recycled products used in its paper.

In Hong Kong, the Hang Seng index lost 0.3 per cent to 24,317.87 as shares of property companies declined. Sun Hung Kai dropped 2.7 per cent to HK$151.50 and Cheung Kong lost 2 per cent to HK$126.80.

On the mainland, financial shares led Chinese stocks downward after the central bank late on Wednesday announced an increase in bank reserve requirements. Shanghai's composite index tumbled 2.7 per cent, after recording its biggest fall in nearly two months the previous day.

Lower oil and commodity prices amid fears of softening US demand pushed Australian shares down. The S&P/ASX 200 index lost 0.1 per cent to 5,804.40. BHP Billiton (NYSE:BHP) slid 2.2 per cent to A$36.70 while Rio Tinto fell 2 per cent to A$120.70.

Elsewhere, Taiwan stocks dropped 2 per cent, while India's benchmark index was down 0.2 per cent. Singapore was down 0.6 per cent by midday.