HONG KONG - ASIAN stocks slipped on Friday as record high crude oil prices threatened to jeopardise earnings and curb consumer spending, with the uncertain economic outlook following US jobs data boosting safe-haven government bonds.

This week has been punctuated by stagflation fears and deteriorating sentiment after the Dow Jones industrial average slipped into a bear market this week, down more than 20 per cent from October highs, joining Asia markets and pushing investors into safety-first mode.

The unfavourable combination of feeble growth and high inflation known as stagflation has caused many analysts to adjust downward their expectations for regional equities and investors to pull back on their willingness to take risks for higher returns.

'All this contributes to the rise in the risk premium in Asia assets.'

Japan's Nikkei share average fell for a 12th day in a row, after posting their longest string of losses in 54 years, dragged down by technology firms such as Tokyo Electron and Advantest.

The pan-Asia MSCI index fell 0.2 per cent, adding to the year's 16.5 per cent decline.

Asia-Pacific shares traded outside of Japan were largely steady, according to an MSCI index, but were hovering around a 10-month low.

Hong Kong's Hang Seng bucked the broad declining trend and rose 0.9 per cent, with Industrial & Commercial Bank of China among the biggest boosts to the index after China's biggest bank issued a positive earnings outlook. Australia?s benchmark rose 0.8 percent.

US markets will be closed on Friday because of a public holiday.

US jobs data released on Thursday showed employers cut workers for a sixth straight month in June for the longest such streak since 2002 and the country's vast service sector unexpectedly contracted, underscoring the economy's frailty.

Energy shock
Japanese government bond yields, which move in the opposite direction of prices, slipped after the European Central Bank raised its benchmark interest rate as expected but gave little indication that more increases were to come.

The 10-year yield fell 3.5 basis points to 1.635 per cent, having fallen about 25 basis points since mid June when global equity markets tumbled.

Short-dated US Treasury yields dropped on Thursday after US payrolls data showed the job market contracted for the sixth consecutive month and private sector job losses amounted to 91.000 in June.

Other indications have shown that investors in Asia are demanding a higher premium to hold assets in a growingly risk-averse environment.

For example, the iTRAXX Asia ex-Japan high-yield index has risen to a three-month high, climbing nearly 100 basis points in the last month.

Compounding inflation fears, oil prices rose to a record high of US$145.85 (S$198.4) a barrel, up more than 50 per cent this year, and the price of soybeans, a key import for China, hit a record high for the fourth time this week.

The central bank of the Philippines on Friday confirmed that the south-east Asian economy has inflation in double-digits, joining Vietnam and India.

Mr Stephen Jen, head of currency strategy with Morgan Stanley in London, said that high energy prices are a 'game changer' for Asia and will have long-term consequences for the region and particularly for China.

'While many investors and analysts are concerned about inflation containment and the effects of monetary reactions, higher price levels of energy, not just inflation, will hurt Asia,' he said in a note to clients.

'In other words, even if oil/energy prices stabilise now, this will be a very significant shock to Asia, especially China.'

The euro edged up 0.1 per cent to US$1.5711 after on Thursday rising as high as US$1.5893, the highest since late April and edging closer to an all-time peak of US$1.6020 that was also hit in April. The dollar slipped 1 per cent to 106.65 yen.

KUALA LUMPUR
The benchmark Kuala Lumpur Composite Index fell 29.17 points, or 2.52 per cent, to 1,124.53, at midday.

HONG KONG
At 10.15am Singapore time, the Hang Seng Index was up 0.7 per cent at 21,387.07.

The China Enterprises Index of top locally listed Chinese firms rose 1 per cent.

SHANGHAI
Chinese share prices were lower in morning trading on Friday with the Shanghai bourse down 0.52 per cent as losses in oil refineries offset a rally in banks, dealers said.

Banks turned higher after Industrial and Commercial Bank of China and Shanghai Pudong Development Bank projected favourable first-half earnings, but oil refiners remained weak after oil prices raced to record highs overnight.

Concerns over further possible measures to curb inflation also weighed on sentiment.

'Investors are more conservative with the weekend approaching, as China's authorities tend to launch tightening measures, including rate hikes, during weekends,' Mr Jacky Zhang at Capital Securities told Dow Jones Newswires.

The benchmark Shanghai Composite Index, which covers both A and B shares, shed 14.11 points to end the morning 0.52 per cent lower at 2,689.42.

The Shanghai A-share index was down 14.79 points, or 0.52 per cent, to 2,820.64 points, but the Shenzhen A-share index edged up 0.35 points, or 0.04 per cent, to 850.80.

TOKYO
Japanese share prices slipped 0.31 per cent in morning trade Friday on soaring oil prices as the Tokyo market suffers its longest losing streak in more than half a century, dealers said.

Crude oil prices blazed over a record US$146 (S$198.6) a barrel overnight, heightening concerns for the global economy.

The Tokyo Stock Exchange's benchmark Nikkei index was down 40.87 points at 13,224.53 at the end of the morning session. It has closed down for 11 straight sessions, the worst losing streak since April 1954.

The broader Topix index of all first-section shares slipped 2.22 points or 0.17 per cent to 1,295.80.