chart , page-13

I'm long on BHP and still hanging in there. I believe today's slide was due to a perceived Asia slow down from Reuters. You can read about it below if you want. But I don't think the US will pay much attention to that and the materials index will continue up. If the materials index is up so will be Rio and Bhp. I dont believe any substantial shorting is occurring atm. But I dont know what effect all the Freddie Mac stuff will have on the Dow. Usually, bad financial news is good for resources, but who knows for sure. However, BHP still too cheap for me to sell. My target on BHP is between $73 and $74. (say about $40 Aus)

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* AIG results weigh on financial sector
* Oil is below $119, down $30 from record high
* G7 recession becomes real possibility

By Kevin Plumberg

HONG KONG, Aug 7 (Reuters) - Asian stocks fell and government bonds rose on Thursday, as a sustained decline in oil prices could not shake a sense of gloom among investors about financial sector instability and the global growth outlook.

Such concerns also weighed on the dollar, which slipped back
from Wednesday's seven-month peak against the yen.

Crude was trading just below $119 a barrel , having
tumbled about 20 percent from July's record high, as expectations for U.S. energy demand continued to deteriorate.

Lower oil prices could be interpreted as relief for U.S.
consumers, on whom Asia depends for export demand. But inflation was still a global threat, bad loans continued to dog banks and insurers and investors faced the prospect of all of the Group of Seven rich nations slipping into a recession.

As a result, optimism was in short supply.

"Certainly the environment is one that should be positive,
with the weaker yen and lower oil prices," said Hideyuki
Ishiguro, supervisor at the investment strategy department at Okasan Securities. "But the idea that Japan's economy isn't good is spreading.

Japan's Nikkei share average <.N225> fell about 1 percent,
led by a 5 percent drop in shares of clothing company Fast
Retailing Co Ltd <9983.T>.

Large bank stocks like Mitsubishi UFJ Financial Group
<8306.T> declined after American International Group Inc , the world's largest insurer, posted a third straight quarterly net loss after U.S. markets closed on Wednesday. [ID:nN062309]

Outside of Japan, Asia-Pacific stocks <.MIAPJ0000PUS> edged
up 0.3 percent but remained within sight of a 16-month low
plumbed on Tuesday.

South Korea's benchmark KOSPI <.KS11> dipped about 0.6
percent, weighed down by the financial sector after the Bank of Korea on Thursday raised its main interest rate by 25 basis points to its highest in 7-½ years to battle price pressures.

"Clearly inflation is up, but there are massive growth risks
for the Korean economy. The entire household sector and small and medium-sized enterprise sector are hugely leveraged. There is likely to be a downturn in economic growth," said Frederic Neumann, Asia Pacific economist with HSBC in Hong Kong.

Other central banks around the world face the same dilemma as the Bank of Korea, namely whether to tighten borrowing conditions now to stem inflation and risk a sharper economic slowdown.

Earlier this week Indonesia's central bank raised rates by 25 basis points for the fourth time this year, but the Reserve Bank of Australia kept rates on hold.

The Federal Reserve held rates steady at 2 percent on
Tuesday, expressing concerns about both the slowing economy and rising inflation. The Fed indicated it is in no rush to push
borrowing costs higher. [ID:nN05346575]

That has helped to spur investors' willingness to take risks, a primary driver in boosting the U.S. dollar to its highest level against the yen in seven months on Wednesday.

The dollar was down 0.2 percent against the yen at 109.41 yen . The euro edged up 0.1 percent to around $1.5430 ahead of a European Central Bank meeting later in the day. The ECB is expected to leave rates unchanged at 4.25 percent.

Surprisingly strong labour market data in Australia and New
Zealand supported their respective currencies, with the
Australian dollar up 0.4 percent at $0.9125 and above a four-month low hit on Wednesday.

Still, the potential for a global recession was lurking in
the minds of many investors.

"All of the G7 economies are now in a recession or headed in
the short run towards a recessionary hard landing," said Nouriel Roubini, chairman of RGE Monitor, a New York economics research firm, in a blog posting on Wednesday.

"While the world will technically avoid a global recession
(defined by the IMF as global growth below 2.5 percent) it will get quite close to it by mid 2009 as global growth will slow down to a near recessionary 3 percent."

Japanese government bond futures hit a four-month high on
concerns about the outlook for Japan's economy and due to a fall in Tokyo share prices.

September 10-year JGB futures rose as high as 137.46 <2JGBv1> for a gain of 0.27 point on the day, the highest level for a lead futures contract since late April.

Editing by
Dhara Ranasinghe)

((Reuters Messaging:[email protected]
Email: [email protected]; +852 2843-6370))