SINGAPORE, Nov 17 - Japanese stocks slumped on Monday and gold neared $400 an ounce as fears of further al Qaeda attacks unsettled investors already worried about U.S. company earnings and the economy. The euro hit a three-week high against the dollar and Japanese and U.S. government bonds gained as investors sought safer harbours. Tokyo's Nikkei average <.N225> sank more than three percent, falling through 10,000 for the first time in three months, following a drop in U.S. stocks on Friday and a worrying report on the health of Japanese banks. Other Asian stock markets were also weaker, by around two percent in Hong Kong <.HSI>, South Korea <.KS11> and Singapore <.STI>. Volatile shares in Internet service provider Softbank Corp <9984.T> sank 12.3 percent in Japan, while Tokyo Electron Corp <8035.T> and TDK Corp <6762.T> fell 6.7 percent. Mizuho Financial Group Inc <8411.T>, the world's largest bank by assets, fell 7.9 percent. "Beyond the effects of the fall in U.S. stocks, bank shares are getting hit following the results of the FSA (Financial Services Agency) inspections on Friday," said Hiroaki Kuramochi, head of global equities at Credit Lyonnais. "And fears about the specific naming of Japan in the latest al Qaeda statement is also weighing on the market."
BOMB THREAT
London-based Arab-language newspaper al-Quds al-Arabi said Osama bin Laden's al Qaeda network was planning car bombings against the United States and its allies, including Japan. The newspaper said it had received a statement from the group claiming responsibility for attacks on two Istanbul synagogues on Saturday that killed at least 23 people. The Nikkei ended morning trade down 3.6 percent at 9,796.80, its weakest since August 14. An MSCI index of shares elsewhere in the Asia Pacific <.MSCIAPJ> dropped 1.5 percent by 0210 GMT to its lowest since October 28. Gold rose as high as $399.50 an ounce in early trade as the dollar weakened following reported al Qaeda statement, nearing the $400 level last breached in March 1996. But the spot price later pulled back to $397.75. "There are lot of bulls out there," said a bullion dealer in Sydney. "I imagine there will be a lot of profit-taking before we touch $400. Certainly, within the next we few days we are going to break $400." The dollar fell against most major currencies, with the euro hitting a three-week high near $1.1845 . "Since the news about the al Qaeda statement, the dollar has come under fresh pressure this morning," said Junya Tanase, forex strategist at JP Morgan Chase in Tokyo. The dollar was already weighed down after a batch of data released on Friday sent a mixed message about the outlook for a U.S. economic recovery. The producer price index overshot expectations, leaping 0.8 percent, compared with consensus forecasts for a 0.2 percent rise, while the University of Michigan's November index of consumer sentiment rose to 93.5 from October's 89.6. Still, the dollar gained against the yen on the drop in Tokyo stocks and expectations the Japanese authorities would step into the market to halt the yen's strength. The dollar was buying around 109.01 yen versus 108.30 in late U.S. trade on Friday. Japanese government bonds (JGBs) rallied across the board as shares dropped, with the yield on the key 10-year JGB <0#JPTSY=JBTC> falling to 1.27 percent, its lowest since late September. U.S. Treasury prices also gained, pushing the benchmark 10-year Treasury note yield down slightly to 4.21 percent compared with 4.22 percent late on Friday in New York. U.S. oil fell nine cents to $32.28 a barrel. U.S. stocks sagged on Friday on disappointing corporate results and the mixed economic data. The Dow Jones Industrial Average <.DJI> dropped 0.7 percent and the Nasdaq Composite Index <.IXIC> fell 1.9 percent. ((For the state of play of Asian stock markets please click on: <0#.INDEXA>))///