Asian stocks slip, North Korea weighs

SINGAPORE, Oct 17 (Reuters) Asian stocks slipped into the red on Tuesday on profit-taking, rising oil prices and fears North Korea might be preparing for a second nuclear test.

The tone was in marked contrast to Monday when stellar earnings from top companies such as South Korea's Samsung Electronics and record gains for U.S. blue chips drove most markets higher.

Japan's Nikkei average retreated from Monday's five-month high to end the morning session down almost 0.5 percent as investors turned cautious ahead of the start of corporate earnings season in Japan and the United States.

The MSCI index of Asian shares outside Japan was down 0.5 percent.

South Korean stocks slipped nearly one percent, but gold hit a two-week high of 7.50 an ounce and U.S. crude held steady at just over a barrel.

Renewed strength in the resources sector helped underpin Australian stocks, pushing up mining giant BHP Billiton.

The dollar was steady at just over 119 yen after falling on profit-taking. Investors are waiting for U.S. inflation and capital flows data later in the day for clues on whether the dollar has room to rise further.

Just over a week after North Korea conducted a nuclear test that sent jitters through financial markets, South Korea's government said on Tuesday it was aware of signs North Korea might be getting ready for another nuclear test.

U.S. television networks earlier reported that U.S. spy satellites had detected suspicious vehicle activity and personnel movements near the site of last week's test.

The reports left investors in South Korea nervous, sending the benchmark KOSPI down 0.83 percent by 0249 GMT.

Exporters such as Samsung Electronics gave up some of their recent gains after oil prices climbed, setting off worries about the impact on global consumer demand.

''Although there is no panic in the markets, issues arising from North Korea's nuclear test will flare up from time to time, and the market could find it hard to sustain gains,'' said Kim Jeong-hwan, a strategist at Woori Investment and Securities.

TESTING TIMES A second test could knock equities for several days, a Japanese fund manager said.

''While Japanese stocks largely shrugged North Korea's previous nuclear test, it would be harder for investors to overlook a second such test,'' said Soichiro Monji, chief strategist of equity management at Daiwa SB Investments.

''If North Korea were to engage in another nuclear test, that would not be a positive and investors would start to worry about what (North Korea) plans to do next. Unlike the last time, that would probably cause stocks to fall for 2 or 3 days I think.'' Investors were also cautious ahead of earnings results from U.S. tech bellwether Intel Corp. later in the day and results from Japan next week, said Tatsuyuki Kawasaki, director of equities trading at Kaneyama Securities.

Recent gainers such as Honda Motor Co. Ltd. and TDK Corp.

were among the decliners, but energy firms such as INPEX Holdings Inc. advanced on higher oil prices.

Sony Corp fell 1.2 percent after four days of gains. A leading Japanese daily said Sony was expected to revise down its annual earnings forecast because of the costs of a widening recall of PC batteries and losses in its game division.

Australian shares reversed early gains as losses in big bank stocks overshadowed gains by top miners. Ballarat Goldfields NL jumped 22 percent after a takeover bid.

Macquarie Bank Ltd. was also higher.

A consortium led by the investment bank won a battle to buy British utility Thames Water for 4.8 billion pounds (.92 billion).

Australia's benchmark S&P/ASX 200 Index was down 0.11 percent in early afternoon trade after hitting a new five-month peak of 5,334.2 earlier.

Hong Kong blue chips followed weak markets across Asia as investors cashed in recent gainers such as China Mobile Ltd.

after five straight winning sessions that drove the market to its highest levels since 2000.

But the Hang Seng index, down 0.77 percent at 0256 GMT, remains just under 18,000 points and close to its record high.

Benchmark U.S. crude rose 24 cents to .18 as producer group OPEC prepared for an emergency meeting this week to try to finalise a plan to cut output by a million barrels per day.

Ministers are due to meet in Qatar on Thursday to thrash out a deal they hope can stem a slide in oil prices from a record high above .

Japanese government bonds edged up after a rise in U.S.

Treasuries, but the 10-year yield stayed near a two-month peak.

Investors are cautious ahead of the Ministry of Finance's auction of 600 billion yen ( billion) of 30-year JGBs on Tuesday.

The 10-year yield dipped 1 basis point to 1.780 percent, but was still hovering near a two-month high of 1.795 percent hit on Monday.

REUTERS SBA RAI1131