Asia stocks slip on Fed remarks about US economy

By PAMELA SAMPSON | June 23, 2011 | 12:14 AM EDT

BANGKOK (AP) — Asian stock markets followed Wall Street down on Thursday after the Federal Reserve admitted to being caught off guard by recent signs of deterioration in the U.S. economy.

Oil prices fell to near $94 a barrel amid a stronger U.S. dollar.

Japan's Nikkei 225 dropped 0.4 percent to 9,594, with shares lower in heavy machinery and equipment makers — companies likely to feel a slowdown in the global economy more sharply. Mitsubishi Heavy Industries Ltd. dropped 1.6 percent and Komatsu Ltd. lost 1.4 percent.

But Japanese export shares benefited from a weaker yen, which makes products sent overseas cheaper. Consumer electronics giant Sony Corp. rose 1.1 percent. Isuzu Motors Ltd., which on Wednesday forecast an increase in dividends for the fiscal year through March, rose 3.7 percent.

Hong Kong's Hang Seng lost 0.8 percent to 21,696.79, with banking shares slumping a day after the China acknowledged that surging inflation will rise again this month — raising the possibility of more action by China's central bank to tighten monetary policy.

China Construction Bank Ltd., the country's third-biggest commercial lender, slid 2.3 percent. Industrial and Commercial Bank of China, the world's biggest bank by market value, was down 1.6 percent.

South Korea's Kospi was 0.2 percent lower at 2,058.88 and Australia's S&P/ASX 200 lost 0.5 percent to 4,511.40. Benchmarks in Singapore, Taiwan and Indonesia were also lower, while those in New Zealand and Malaysia were higher.

Investor sentiment slid Wednesday, after Fed Chairman Ben Bernanke said at a news conference in Washington that some of the problems plaguing the U.S. economy such as weakness in the financial industry and the housing market and "may be stronger and more persistent than we thought."

Earlier, the Fed released a slightly lower forecast for U.S. economic growth this year. The Fed said it now expects the economy to grow between 2.7 percent and 2.9 percent this year, down from its previous estimate of 3.1 percent to 3.3 percent after its last meeting in April.

The Dow Jones industrial average and the Standard & Poor's 500 index slumped after Bernanke's cautious remarks about the economy.

The Dow closed down 0.7 percent at 12,109.67. The S&P 500 index fell 0.7 percent to close at 1,287.14. The Nasdaq fell 0.7 percent to 2,669.19.

Even with the dimmer outlook, the Fed pledged no new help to boost the economy. The central bank's $600 billion bond-buying program draws to a close at the end of this month.

Benchmark oil for August delivery was down $1.19 to $94.22 a barrel in electronic trading on the New York Mercantile Exchange. The contract gained $1.24 to settle at $95.41 on Wednesday.

In currencies, the euro dropped to $1.4312 from $1.4376 late Wednesday in New York. The dollar strengthened to 80.48 yen from 80.32 yen.