HONG KONG—Asian stocks extended losses on Thursday despite a recovery on Wall Street from a global sell-off that saw many markets suffer their worst one-day drops since the Sept. 11, 2001 attacks, with investors not ready to shed their newfound aversion to risk.
The dollar fell more than half a percent from an earlier intraday peak against the yen as investors cut short positions in the Japanese currency amid the continued slide in Asian stocks.
The greenback had taken strength earlier from the rebound in U.S. stocks and U.S. Federal Reserve Chairman Ben Bernanke's comments that it was "reasonable" to expect stronger growth later in the year.
Crude oil eased after climbing towards $62 a barrel on surprisingly large falls in U.S. fuel inventories, with U.S. crude losing 29 cents to $61.50 a barrel.
The benchmark 10-year U.S. Treasury yield rose to 4.56 percent as the allure of safe haven assets eased amid the stronger showing by U.S stocks. Bond prices and yields move in opposite directions.
Tokyo gold futures fell slightly as investors remained cautious following the heavy selloff the previous day spurred by the global stocks selldown.
MSCI's index of Asian stocks outside Japan was down 0.93 percent on Thursday after reaching a record high on Tuesday.
"Wall Street bounced back, but not as much as investors had hoped," said Renji Motohashi, general manager of the equity department at Shinko Securities in Tokyo.
Japan's Nikkei average fell 1.63 percent after closing 2.9 percent lower on Wednesday in its biggest daily decline in eight months, with worries about the possibility of a U.S. recession battering exporters and manufacturers such as Toyota Motor Corp. and Kyocera Corp.
Stocks in Australia and Hong Kong were both half a percent lower, with Chinese shares listed in Hong Kong down 1.18 percent.
Indian shares defied the selldown, rising 0.61 percent in early trade after skidding 4 percent on Wednesday. Singapore stocks .also booked early gains before easing towards neutral territory.
The Taiwan stock market, which was closed on Wednesday and missed the global sell-off, lost 3 percent, while Seoul was closed for a holiday.
Shanghai Slides
The Shanghai index, which helped trigger the global slide with a nearly 9 percent drop on Tuesday, fell 1.72 percent after recovering by almost 4 percent on Wednesday, despite a gain of as much as 51 percent by Ping An Insurance in its $5 billion Shanghai IPO debut.
"While increased risk aversion may still have some room to go, we think the correction is unlikely to turn into a serious meltdown," Citigroup wrote in a research note.
U.S. stocks rebounded on Wednesday, but shares in Europe racked up another losing session. Wall Street's volatile recovery was solidified after Bernanke told Congress there did not appear to be a single trigger for this week's global stock slump.
The Dow Jones industrial average closed 0.43 percent higher, while the Standard & Poor's 500 Index gained 0.56 percent and the Nasdaq advanced 0.34 percent.
Credit markets in Asia jumped both on a technical rebound and support from higher emerging debt markets elsewhere.
Overnight in New York, spreads on emerging market debt tightened on Bernanke's positive view of the U.S. economy with yield spreads tightening 12 basis points to 182 bps above U.S. Treasuries, according to the benchmark JP Morgan's EMBI+ index
"We are at or better than levels we were two days ago. Yesterday, the bids did pull back initially but offers never lowered, so it was hard to find trade going on. Today it is more active," said a Hong Kong based trader.
"There is good technical support but we expect to see more volatility originating from the stock markets," he added.
The dollar rose to about 118.85 yen
Asian stocks listed on Wall Street rose 0.84 percent overnight, a day after posting their worst one-day drop in nearly three years.
European stocks endured a second straight losing day on Wednesday, with the FTSEurofirst 300 index of top European shares closed down 1.6 percent at 1,481.89, its lowest close since Jan. 10.
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