SINGAPORE (Reuters) - Asian stocks fell on Friday as news of the assassination of Pakistani opposition leader Benazir Bhutto and fears over regional political turmoil triggered a flight to less risky assets such as bonds and gold.
Investors fear that Bhutto's killing on Thursday at a political rally in Rawalpindi could spark instability in the region and civil unrest within Pakistan.
"It would have quite a big impact on flows into the region since political risk is one the big factors when you invest money," said Martin Arnold, equities economist with Commsec Securities in Australia.
"It is also going to impact commodities, and in particular oil, on expectations that further violence in the region could hamper oil supplies and production," he added.
U.S. light crude was up 19 cents at $96.81 a barrel by 0032 GMT, further boosted by a fall in U.S. crude supplies, while gold changed hands at around $826 an ounce after hitting a one-month high of $830.05 overnight.
Markets in the U.S. were unsettled by Thursday's news, with the Dow Jones industrial average shedding 1.4 percent and the benchmark 10-year U.S. Treasury note jumping 23/32 in price, pushing its yield down to 4.19 percent.
Japanese 10-year bond yields fell to 1.51 percent from 1.55 percent.
Indian-based American Depositary Receipts were dragged lower as Bhutto's death raised concerns about stability in South Asia.
Among the biggest losers were Mumbai-based commercial vehicle maker Tata Motors Ltd and ICICI Bank Ltd, which both shed around 6 percent.
MSCI's broadest index of shares excluding Japan was down 0.2 percent by 0038 GMT.
Benchmark indexes in Australia, South Korea and New Zealand fell by more than 0.5 percent.
Japan's Nikkei index fell 1.5 percent and was on course to end the year as the world's worst performing big stock market.
But global emerging equities dipped just 0.1 percent.
"The assassination in Pakistan pushed up oil prices and there is a worry that mounting geopolitical risks would further boost oil prices," said Kim Hak-kyun, an analyst at Korea Investment & Securities.
"But as Pakistan is not a country with developed financial markets and the country's connection with global credit markets is minimal, the case would have a limited and short-term impact on markets."
Pakistan 5-year credit default swaps, used to insure against restructuring or default, widened by at least 30 basis points on Thursday after Bhutto was killed in a gun and bomb attack.
CDS spreads widened by 30 basis points to 400-430 basis points, said one New York-based trader late on Thursday.
The Pakistan rupee was last quoted at 61.30 against the dollar, just off a 3-year low.
The dollar traded at 113.964 yen, having reached a seven-week high at 114.65 earlier on Thursday.
On top of concern over political unrest in Pakistan, a weaker-than-expected U.S. durable goods report fuelled yet more concern about the U.S. economy.
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