By Kevin Plumberg
HONG KONG (Reuters) - Oil rose above $116 a barrel onMonday, as a quarter of U.S. crude production was shutteredbecause of Hurricane Gustav, while Asian stocks were stung byslumping technology shares.
Gustav was expected to strike land west of New Orleans, onthe Louisiana coast, only days after the sombre anniversary ofHurricane Katrina's devastation in 2005, though the storm wasnot expected to strengthen significantly once it made landfall.
South Korea's won fell sharply against the U.S. dollar asdealers panicked about the potential for foreign investors tobail out of their domestic debt investments because ofdeteriorating conditions in Asia's fourth-largest economy.
The dollar rose broadly, extending last month's biggestrally in more than a decade, on the view the U.S. economy islikely to recover more quickly than other major economies thatare probably still shrinking. The dollar's rally was strikingsince it took place with oil prices also rising, which showedthe crude market's singular focus on Gustav.
"This is definitely a dangerous storm but I think most ofthe market is in a wait-and-see mode," said Gerard Burg, acommodities analyst at National Bank of Australia in Melbourne."Investors are a lot more cautious now given the generalbearish sentiments in the market."
The October U.S. light crude contract climbed 94 cents to$116.38 a barrel, though was only $5 from an August low. U.S.markets are closed on Monday for a holiday.
Japan's Nikkei stock index fell 1.7 percent, weighed byshares of tech companies such as TDK and electronics partsmaker Kyocera.
Stark comments about slowing global demand for technologyfrom the world's second-largest computer maker Dell, whichknocked U.S. stocks lower on Friday, dealt a blow to a sectorwhose valuations have been among the hardest hit by the bearmarket.
Outside of Japan, Asia-Pacific stocks were down 2.2percent, eyeing August's lows.
The Shanghai composite index in China dropped 2.6 percenton pessimism about the outlook for corporate earnings,extending its year-to-date fall to 53 percent.
South Korea's KOSPI fell 3.3 percent to the lowest sinceMarch 2007, led by shares of Samsung Electronics and LG.
WON SUFFERS BIG LOSSES
The Korean won lost about 2 percent to 1,111.90 per dollar,the weakest since November 2004, despite countless times theBank of Korea has defended its currency this year.
The country's markets entered September in a severe moodgiven the unusually high amount of won-denominated bondsmaturing in September held by foreign investors. The fear isthat they may take their money and walk, rather than rollingover the debt.
"This is more to do with the market panicking about whatmay happen and also the market is increasingly convincedintervention cannot be as aggressive as it was in previousmonths.
There's a perception the Bank of Korea is running out ofammunition," said David Mann, head of research, Korea andforeign exchange strategist with Standard Chartered in HongKong. "We're not expecting this to last for very long... Theworst point will be over the next few weeks rather than thenext few months."
Investors pulled money out of funds across the board lastweek, though financial sector funds attracted new money,according to EPFR Global, a Boston-based firm that tracks $10trillion in assets.
Fund outflows from 17 of the 24 equity, sector and fixedincome groups watched by EPFR totalled $7.6 billion.
All emerging market fund groups recorded outflows lastweek, with money leaving emerging market equity funds for the11th time in the last 12 weeks.
"Appetite for exposure to emerging markets has been erodedby a sharp correction in commodity prices during the thirdquarter of 2008, a string of downward revisions to economicgrowth forecasts and painfully high inflation rates in severalkey markets including Russia, India, South Africa andArgentina," the firm said in a research note released over theweekend.
The dollar strengthened against both major and emergingmarket currencies, ahead of a busy week of central bankmeetings, including the European Central Bank, the Bank ofEngland and the Reserve Bank of Australia.
The euro was down 0.4 percent at about $1.4637, on its wayto testing a six-month low around $1.4570 hit last week.
The dollar was largely unchanged against the yen, at 108.42yen.
Sterling fell 0.5 percent to $1.8040 after ChancellorAlistair Darling told a newspaper the country's economicdownturn might turn out to be the worst in 60 years.
(Additional reporting by Fayen Wong in PERTH; Editing byJean Yoon)
