By Jason Subler SINGAPORE (Reuters) - Asian stocks fell on Tuesday, led by financial firms and exporters, as renewed worries about further damage from the global credit crunch prompted investors to seek shelter in safer assets such as government bonds. Shares extended early losses after the Wall Street Journal reported that Lehman Brothers may raise another $3-4 billion in fresh capital, suggesting it could post its first quarterly loss since going public. European stocks also opened lower, with the FTSEurofirst 300 index of that region's top stocks falling 0.4 percent in early trade. The Lehman report added to credit worries triggered by a spate of negative news overnight, including ratings agency Standard & Poor's downgrading the debt ratings of three major U.S. investment banks, sparking selling in the dollar, weighing on Asian stocks and boosting demand for safe-haven government bonds. "We're going to go back perhaps to a more fragile view about credit markets and equity markets," said Sean Darby, an equity strategist at Nomura in Hong Kong. "Summer's around the corner, and I suspect that markets are going to drift off. They won't necessarily touch the January levels, but we'll see these markets still produce negative returns for the best part of Q2," he said. The dollar was down 0.3 percent from late U.S. trade at 104.15 yen moving away from a three-month high of 105.88 yen hit last week. That extended the Japanese yen's gains from Monday, when it saw its biggest daily gain against the dollar in nine weeks as investors unwound yen carry trades, in which the low-yielding currency is used to buy riskier assets elsewhere. "The market is very cautious about developments with troubled financial firms," said Hideaki Inoue, chief manager of forex trading at Mitsubishi UFJTrust Bank in Tokyo. "But market players are psychologically better prepared for bad news compared to what it was like in March when dollar/yen tumbled as if in a free-fall below 100." Japan's Nikkei share average ended down 1.6 percent, snapping a three-day winning streak, with exporters such as Honda Motor Co Ltd leading the decline on concerns that a stronger yen would dash overseas demand for Japanese goods. The MSCI index of shares in the Asia-Pacific region outside Japan was down 1.8 percent in late afternoon, compared with a 0.4 percent drop mid-morning, putting it on course to end a three-day run of gains. A pan-Asian index was down 1.3 percent. FLIGHT TO QUALITY Hong Kong shares extended early losses to fall 2.1 percent, weighed by the Lehman report and hefty losses in Chinese telecoms stocks, as investors locked in gains in the run-up to a recent announcement of an industry reshuffle. The Korea Composite Stock Price Index was down 1.5 percent. Taiwan's TAIEX index fell 1.7 percent, hit by falls in technology companies such as TSMC, which rely heavily on exports. Australian shares also fell, with the benchmark S&P/ASX 200 index down 1.6 percent to a five-week low, led by declines in financial firms such as Macquarie Group Macquarie, the country's top investment bank, slumped 6 percent. The renewed warnings that the credit crisis sparked by defaults in U.S. subprime mortgages is not yet over gave broad support to assets that are seen as less risky, even though high inflation is prodding investors to seek higher yields. U.S. Treasuries climbed for a second day as investors sought safer bets and as some rushed to cover short positions after a slide last week pushed yields to a five-month peak above 4 percent. Japanese government bond futures jumped, matching their biggest daily gain in five years hit in March, with June 10-year JGB futures ending up 1.43 point at 135.35 The benchmark 10-year yield on Japanese government bonds, which moves in the opposite direction of the price, fell 6.5 basis points to 1.720 percent pulling away from a 10-month high of 1.805 percent hit last Thursday. "JGBs are taking cues from the flight-to-quality type moves seen in U.S. and European markets as concerns about the financial sector re-emerged," said Naomi Hasegawa, senior fixed-income strategist for Mitsubishi UFJ Securities. JGB futures extended gains to rise a full point, with June 10-year futures rising as high as 135.52, up more than a point on the day. Crude oil prices fell slightly, with the July contract easing 26 cents to $127.50 a barrel. But crude prices are still up a third since the start of the year, prompting concerns over their drag on economic growth and adding to global inflationary pressures. | 
