3 Jul 2009, 0138 hrs IST

Business World News: HONG KONG – Asian stocks retreated Friday as a weaker-than-expected U.S. jobs report signaled more pain ahead for the world's largest economy.

Losses across Asia were somewhat tame compared to Wall Street, where markets pulled sharply lower. Oil prices were flat after tumbling Thursday, while the dollar was little changed against the yen.

Optimism about the U.S. economy, a vital export market for Asia, buckled after the government said employers slashed 467,000 jobs in June — far worse than the 363,000 that economists predicted. The unemployment rate hit a 26-year high of 9.5 percent.

Investors have sent markets surging between in recent month after the global economy flickered to life as companies began restocking their inventories and international trade picked up modestly.

But the dismal job report just reinforced worries that a full recovery in the U.S. economy, even if the recession comes to an end this year, is still far off.

"The fundamentals of the economy are still not sound," said Arjuna Mahendran, head of Asian investment strategy at HSBC Private Bank in Singapore. "You're going to see less and less of these green shoots."

Mahendran said equities markets could fall between 15 percent and 20 percent in the coming months.

Japan's Nikkei 225 stock average dropped 129.03, or 1.3 percent, to 9,742.35, and Hong Kong's Hang Seng lost 76.82, or 0.4 percent, to 18,101.23.

In Korea, the Kospi shed 0.2 percent. Australia's benchmark fell 1.4 percent and India's Sensex declined 0.4 percent.

China's Shanghai Composite index was flat.

Overnight on Wall Street, the Dow Jones industrials lost 223.32, or 2.6 percent, to 8,280.74, the lowest close since May 22. It was the average's worst day since April 20. The Standard & Poor's 500 index fell 26.91, or 2.9 percent, to 896.42 and the Nasdaq composite index fell 49.20, or 2.7 percent, to 1,796.52.

U.S. Markets will be closed Friday in observance of the Independence Day holiday.

Oil prices was little changed in light holiday trading volume, with benchmark crude for August delivery up 2 cents at $66.75. The contract plunged $2.58 as disappointing job numbers in the U.S. and Europe raised concerns about demand.

In currencies, the dollar was flat at 95.92 yen. The euro rose moderately to $1.3990 from $1.3951.