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GLOBAL MARKETS-Nikkei leads Asia up, China falls on policy worry

Published 01/08/2010, 02:33 AM
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* Nikkei hits 15-month high, leading Asian stocks higher

* China, Hong Kong stocks wobble on policy tightening fears

* Concerns about China tightening also weigh on oil, gold

* Investors wary ahead of U.S. jobs data

By Kevin Yao

SINGAPORE, Jan 8 (Reuters) - Japanese stocks hit a 15-month high on Friday as the yen eased against the dollar, leading most Asian markets higher, but Chinese shares and commodities stumbled on fears that Beijing is ready to tighten policy to cool economic growth.

European equities were set to edge higher, with financial spreadbetters expecting Britain's FTSE 100 <.FTSE> to open as much as 0.3 percent higher, and Germany's DAX <.GDAXI> and France's CAC-40 <.FCHI> seen up as much as 0.4 percent.

Investors were cautious, however, ahead of all-important U.S. non-farm payroll data later in the day (1330 GMT). The report is expected to show the world's largest economy stopped shedding jobs last month for the first time since it fell into recession two years ago. [ID:nN0747110]

Expectations that the job report will point to an improving U.S. economy have helped lift the dollar to a four-month high against the yen.

Japan's Nikkei average rose 1.1 percent, with exporters such as Honda Motor Co <7267.T> buoyed by expectations that yen weakness will make their products more competitive, while memory chip-related stocks climbed on growing global demand for high-tech products. Honda shares jumped 3 percent.

"Shares of exporters will likely continue to fare well for a while, helped by the weakening yen," said Kenichi Hirano, operating officer at Tachibana Securities.

The MSCI index of Asia Pacific stocks outside Japan edged up 0.3 percent <.MIAPJ0000PUS> but was still off its 17-month highs hit earlier this week.

A similar Thomson Reuters index <.TRXFLDAXPU> rose nearly 0.6 percent.

However, fears that Beijing may be getting ready to use more forceful measures to fight inflation hurt investor sentiment in China and Hong Kong.

The central bank surprised markets on Thursday by raising the interest rate on its three-month bills for the first time since August.

The Shanghai Composite Index <.SSEC> fell as much as 1 percent at one point before ending the day little changed. The index fell nearly 2 percent on Thursday, its biggest daily percentage drop in two weeks, after the central bank's move.

Hong Kong's Hang Seng index <.HSI> was down 0.2 percent at midday on worries that China will rein in bank lending and property purchases to prevent possible asset bubbles from forming.

Commodity prices extended losses from Thursday as traders feared policy tightening would curb China's enormous appetite for resources from metals to crude oil. [ID:nTOE60604H]

Shanghai copper prices fell 1 percent and zinc futures tumbled their 5 percent daily limit.

Spot gold shed almost 0.9 percent to $1,121.60 per ounce. Bullion prices had climbed 4 percent in the first three trading sessions of 2010 to a three-week.

Crude oil for February delivery was down 40 cents, or 0.5 percent, to $82.26 a barrel, falling further from a 15-month high hit on Wednesday.

DOLLAR FIRM ON ECONOMY, RATE EXPECTATIONS

The dollar hit a fourth-month high against the yen on expectations for an upbeat U.S. jobs report, but briefly gave up some of its gains after new Japanese Finance Minister Naoto Kan said markets should decide exchange rates. [ID:nTOE6060AU]

Kan said on Thursday he wanted the yen to weaken to help the country's exporters, raising the possibility of intervention by Japanese authorities and sparking a sell-off in the currency.

The dollar edged up 0.1 percent to 77.977 against a basket of six major currencies <.DXY> <=USD>.

The U.S. dollar also got help from U.S. regulators urging banks to protect themselves against hikes in interest rates, supporting views that the Federal Reserves will start raising interest rates this year. [ID:nN07206622]

A strong jobs report would fuel speculation that the Federal Reserve could start tightening policy and perhaps even raise interest rates sooner than expected. [FED/R]

Global investors are increasingly focused on when central banks will unwind emergency growth-stimulus measures put in place during the global financial crisis. Withdrawing them too soon could undermine still fragile economic recoveries, while leaving them in place too long could trigger inflation and potentially sow the seeds of another crisis.

Central banks in South Korea, India and the Philippines have all talked explicitly this week about exit strategies as their economies improve. (Editing by Kim Coghill)

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