* Australia stocks rise, buoyed by metals, oil, mergers
* Other Asian shares trail; China's CNR makes weak debut
* Copper prices rise, oil holds just below 5-week high
* Dollar firm as investors weigh prospects for 2010
By Charlotte Cooper
TOKYO, Dec 29 (Reuters) - Australian shares rose on Tuesday, helped by gains in oil and metals and by merger activity, but stock markets elsewhere in Asia lagged as year-end activity dwindled and the dollar's rally ran out of steam.
Shares in Europe were expected to be mixed with the UK market seen rising, playing catch-up with Wall Street after a four-day Christmas break, while U.S. stock futures edged higher.
Oil held below $79 a barrel after setting a five-week high on Monday on expectations that colder weather in the United States and signs of economic recovery would help energy demand, while copper prices surged.
In Tokyo, the Nikkei average squeaked to a positive close after briefly touching a four-month high, while the MSCI index for Asia excluding Japan edged up 0.3 percent but was still some way off matching November's 2009 peak.
The MSCI Asia ex-Japan index looks set to post a gain of well over 60 percent for 2009, but is still about 30 percent off its late 2007 peak before the global financial crisis erupted.
"Investors seem to be using the last days of this year to search for theme stocks -- companies connected to emerging markets, which are likely to remain strong next year, as well as resource-linked shares," said Noritsugu Hirakawa, a strategist at Okasan Securities in Tokyo.
Shares in Australia outperformed, rising 1.1 percent to a nine-week closing peak as farm chemicals group Nufarm agreed to sell a stake of up to 20 percent to Japan's Sumitomo Chemical Corp for around $590 million.
BHP Billiton Ltd, the world's biggest miner, gained about 1.1 percent to its highest in nearly 18 months and Newcrest Mining Ltd., Australia's largest gold miner, rose 0.4 percent as metals prices rose.
Copper prices rose to their highest since September 2008 as trading in London Metal Exchange contracts resumed after a four-day holiday, chasing gains made in Shanghai over the break.
The gains came as strike votes at two large Chilean copper operations threatened output disruptions, supporting prices.
After gaining on Monday, spot gold stood at $1,105.20 an ounce against New York's notional close of $1,105.60.
Asian shares have risen substantially from March when stock markets began their recovery from the financial crisis, with Japan's Nikkei up 50 percent.
But there are plenty of uncertainties for the year ahead, including the tricky task for policymakers of withdrawing emergency stimulus measures. Unwinding stimulus strategies too soon could send the global economy back into a slump, while keeping them in place too long could fuel inflation.
Investors will also be looking at whether the U.S. dollar can make a sustained recovery after rising in recent weeks on optimism that its economic recovery was on more solid footing.
Analysts say investors should be more discerning in 2010 in terms of both sectors and countries, with fiscal policies under the spotlight, and while equity markets are expected to rise further they are not seen climbing at the same pace as this year.
"Caution will be necessary as we head into the new year. It's hard to think the market will just keep rising as there's still a chance it could very well test another trough," said Yutaka Miura, a senior technical analyst at Mizuho Securities.
In Japan, shares of exporters that had led recent gains ran out of steam, while trading houses such as Mitsui & Co climbed as commodity prices rose.
Twenty years ago this month, around the peak of Japan's asset price bubble, the Nikkei marked a record high of 38,915.87, nearly four times the current level.
Japan Airlines fell over 10 percent at one point to a record low after media reports that a state-backed turnaround fund now weighing whether to support JAL with loans and investments was considering a bankruptcy filing as one component of its restructuring plan.
Shares in Seoul fell 0.8 percent, while in Shanghai the key stock index gained late in the day.
Shares in Chinese train maker CNR Corp, which raised $2 billion this month in China's fourth-largest initial public share offering this year, rose 2.2 percent in a weaker-than-expected debut.
"The weak debut is actually good for the market, as it sends a warning for future IPOs, forcing companies to think twice before they set sky-high IPO prices," said Chen Huiqin, a senior stock analyst at Huatai Securities in Nanjing.
Shares on Wall Street edged up to 2009 closing highs, with retailers lifted by improved consumer spending. The Dow Jones industrial average rose 0.3 percent while the Standard & Poor's 500 rose 0.1 percent.
The dollar held firm at 91.72 yen and $1.4384 per euro but failed to push on with its rally of the past few weeks after hitting a 14-year low against the yen in November.
Traders said upward pressure on long-term U.S. Treasury yields was providing it with support, after the benchmark 10-year note yield rose to its highest in nearly five months. (Additional reporting by Nick Trevethan in Singapore, Lu Jianxin and Ed Klamann in Shanghai and Elaine Lies in Tokyo) (Editing by Kim Coghill)