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GLOBAL MARKETS-Asian shares up, dollar soft as confidence mends

Published 06/26/2009, 02:40 AM
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* Asian shares rise, but S&P futures ease

* Dollar slips, drop in U.S. yields weighs

* Oil extends gains above $70 a barrel

By Charlotte Cooper

TOKYO, June 26 (Reuters) - Asian share markets rose on Friday as higher oil and metals prices boosted resource stocks, while the dollar fell on lower U.S. yields and as investors gingerly shifted some funds back into riskier assets.

In Europe, shares were set to rise with resource stocks also poised to gain, while Swiss lender UBS AG said it planned to raise about 3.8 billion Swiss francs ($3.48 billion) by selling shares and expected to post a second-quarter net loss.

U.S. crude oil futures pushed on above $70 a barrel on renewed rebel attacks against oil facilities in Nigeria and worries that a glitch at the largest U.S. oil refinery may tighten gasoline stockpiles.

The MSCI index of Asian stocks excluding Japan climbed 1.4 percent to 322.60, although it remains below the eight-month highs scaled at the start of June, while Japan's Nikkei ended up 0.8 percent.

The Nikkei has risen 11 percent since the start of the year but is still down 29 percent from a year ago, while the MSCI ex-Japan is up 30 percent so far this year but down 27 percent on a year ago.

Australian shares jumped 1.2 percent, lifted by oil producers, banks and Qantas Airways Ltd after it cut and deferred orders of Boeing Co Dreamliner aircraft in a cost-saving move.

"The tone of the market is reasonable, people are prepared to buy on the dips ... but it is also hard to see the market roaring ahead," said David Spry, research manager at FW Holst in Melbourne.

Japan's Nippon Oil Corp rose 3 percent after a newspaper reported that it and other Japanese companies were in the final stage of talks with Iraq to win the development contract for Iraq's huge Nassiriya oilfield.

Suzuki Motor climbed 5.5 percent after a source familiar with the matter said Volkswagen was exploring a potential cooperation deal with Suzuki as a way to boost its expertise in the area of ultra-small cars.

A climb on Wall Street supported Asian shares, although S&P futures eased on Friday indicating a soft start later.

U.S. stocks rose after encouraging news from retailer Bed Bath & Beyond Inc and after Federal Reserve Chairman Ben Bernanke withstood grilling in Congress on whether he had coerced Bank of America Chief Executive Kenneth Lewis to go forward with plans to buy a flagging Merrill Lynch.

The Dow Jones industrial average closed up 2.1 percent, with similar gains on the Standard & Poor's 500 Index and the Nasdaq Composite Index.

MIXED FEELINGS

Copper prices in Shanghai rose, chasing a two-week high in London prices set the previous day, while spot gold held near $942 per ounce as firmer oil supported bullion's appeal as potential hedge against oil-led inflation.

U.S. crude futures were trading at $70.80 a barrel, after jumping 2.3 percent the previous session.

Share markets have been in retreat in the past two weeks as investors paused to work out if a rally in place since March has run out of steam, as economies around the world struggle.

Boston-based fund tracker EPFR Global said global equity funds showed outflows of $4.12 billion in the week to June 24, while $25.9 billion went into money market mutual funds. Japanese equities saw the sixth straight week of outflows.

And data continues to show a mixed picture.

In Japan, consumer price data showed a record drop on the year in May, with falling demand increasingly blamed as the country's second bout of deflation in less than two years deepens.

New Zealand's economy shrank for the fifth quarter in the first three months of this year, marking its longest contraction on record.

Debt markets have benefited from economic uncertainty and the yield on the benchmark 10-year Treasury note, which moves opposite to price, touched its lowest level in four weeks on Thursday as a jump in jobless claims aggravated worries.

Treasuries fell slightly in Asia, pushing the yield back up to 3.567 percent as investors took profits.

But markets are more confident than they were a few months ago and for shares, the U.S. Federal Reserve's statement on Wednesday reinforced expectations that interest rates will remain at a record low for a while.

In one measure of how investor sentiment has improved, the CBOE Volatility Index, a favourite measure of investor anxiety, on Thursday closed at its lowest level since just before Lehman Brothers filed for bankruptcy protection last September.

Investor confidence was also helped on Thursday by the Fed and its counterparts around the world extending currency swap lines until February 2010 so they have U.S. dollars to lend in their markets.

The dollar index, a gauge of its performance against six other major currencies, fell 0.4 percent and the U.S. currency softened to 95.94 yen, while the euro rose 0.4 percent to $1.4040. The dollar has risen about 6 percent against the yen this year but only 1.2 percent on the index. (Editing by Tomasz Janowski)

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