Tokyo stocks hit 28-yr low as investors flee risky assets

* Tokyo's Topix hits lowest since late 1983
* MSCI Asia ex-Japan falls to 2012 lows
* U.S. crude slips nearly 2 pct, Shanghai copper touches2012 lows
* JGBs soar, 10-year yield lowest since July 2003 on safetybid
* European shares likely slump
    
TOKYO - The Tokyo market slumped to a28-year low on Monday as Asian shares dived on fears of anightmare scenario of euro-zone breakup, U.S. economic relapseand a sharp slowdown in China.    
Tokyo's Topix index lost as much as 2.4 percent to692.18, a level not seen since late 1983, according to Reutersdata, while the Nikkei average of major stocks tumbled 2percent. The Nikkei last week marked its ninth straight week oflosses, the longest such losing streak run in 20 years.     

The MSCI's broadest index of Asia-Pacific shares outsideJapan fell by as much as 2.5 percent to 2012lows, down 17 percent from this year's peak, continuing a routof global stocks sparked on Friday by weak U.S. jobs data.
    
European shares were likely to extend their losses, havingwiped out all their 2012 gains on Friday.
Spreadbetters tippedmajor European markets to fall by as much as1.8 percent when trading resumes on Monday.    

And U.S. stock futures also pointed to more selling wheninvestors wake up in North America, with S&P 500 futures down 0.7 percent in Asian trade.    

"Investors are just fleeing risk assets," said ATI AssetManagement chief investment officer Simon Burge.    

"Bond yields are at an all-time low. Even in the globalfinancial crisis we didn't see bond yields at the levels thatthey have reached now ... This is a flight from risk assets thatis unprecedented," Burge said.    

The benchmark 10-year Japanese government bond yield fellbelow 0.80 percent to its lowest since July 2003.Ten-year JGB futures prices jumped to a 19-month high.    

U.S. and German government bond yields had both hit recordlows on Friday, with 10-year German yields dippingto 1.127 percent and 10-year Treasury yields touching a historic low of 1.442 percent.    

"The jobs number from the U.S. was shocking and Spain is nowbecoming a big worry. On top of that everyone who thought Q1would be the bottom for the Chinese economy has realized thatthis is a real slowdown that could go on," said Larry Jiang,Hong Kong-based chief investment strategist at Guotai JunanSecurities.    

The CBOE Volatility index, which measures expectedvolatility in the Standard & Poor's 500 index over thenext 30 days, jumped nearly 11 percent to its highest sincemid-December on Friday, reflecting mounting risk aversion.     
    
    
POLICY RESPONSES EYED    

Analysts said the flight to bonds would continue untilclarity emerged on issues such as the outcome of Greek electionsdue on June 17 and the recapitalisation of European banks, nowin the shadow of a Spanish banking crisis.    

"It's not an issue of risk-on or risk-off anymore, it'snervousness all over until a clear direction emerges on along-term trend," said Hisamitsu Hara, chief foreign exchangemanager at Bank of Tokyo-Mitsubishi UFJ.    

U.S. jobs growth braked sharply for a third straight monthin May and the jobless rate rose for the first time in nearly ayear, with 69,000 jobs added to payrolls last month, the leastsince May last year.     

The weak data followed poor Chinese manufacturing and dismalEuropean data on factory activity, rattling markets that hadalready been on edge over the deepening euro-zone crisis. Thenumbers fuelled speculation that the U.S. Federal Reserve wouldhave to launch further monetary stimulus to shore up growth.    

A Reuters poll of 15 primary dealers, which do businessdirectly with the Fed, showed a 50 percent chance of a thirdround of quantitative easing.     

The yen was off its Friday highs against the dollarand the euro. It stood at 78.13 yen to the U.S. dollar, off a3-1/2 month high of 77.65 yen hit on Friday. It traded at 96.94 against the euro, having reached around 95.59 yen onFriday, its strongest level since December 2000.    

The euro was at $1.2408, recovering from Friday'strough of $1.2288, its lowest in nearly two years. TheAustralian dollar, which is closely linked to risk appetite,staged only a meek recovery from eight-month lows hit on Friday.    

"If the European situation worsens, then the global interestrate and policy solutions would require coordinated actions bythe Bank of Japan and the Federal Reserve to assure access toU.S. dollar money markets, otherwise risk a contraction inglobal trade," said Richard Hastings, macro and consumerstrategist at Global Hunter Securities.    
    
COMMODITIES SLIDE    

Analysts are eagerly awaiting the European Central Bank'spolicy decision on Wednesday and U.S. Fed Chairman BenBernanke's congressional testimony on Thursday, looking forclues on their responses to vulnerable global growth.    

Spot gold edged 0.2 percent lower to $1,622.81 anounce on Monday, largely holding its ground after recording itsbiggest one-day rally in more than three years on Friday.     
U.S. crude futures fell 1.9 percent to $81.65 abarrel to its lowest in almost eight months, and Brent dropped 1.7 percent to $96.79, a 16-month low.    

Worries about slowing global growth also pushed Shanghaicopper down more than 3 percent to a new 2012 low ofaround 52,450 yuan ($8,200) a tonne.    

Heightened risk aversion pushed up the cost of insuringagainst corporate and sovereign defaults in Asia, with thespread on the iTraxx Asia ex-Japan investment-grade index widening by 13 basis points.($1 = 6.3690 Chinese yuan)