GLOBAL MARKETS-Australia leads Asia stocks as commodities gain

* Australia stocks rise, buoyed by metals, oil, Nufarm

* 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.

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 demand, while copper prices surged.

In Tokyo, the Nikkei average <.N225> was flat after briefly touching a four-month high, while the MSCI index for Asia excluding Japan <.MIAPJ0000PUS> edged up 0.2 percent but was still some way off matching November's 2009 high.

Shares in Australia outperformed, rising 1.2 percent <.AXJO> to a nine-week peak as farm chemicals group Nufarm agreed to sell a stake of up to 20 percent to Japan's Sumitomo Chemical Corp <4005.T> for around $590 million. [ID:nSGE5BR0AE]

BHP Billiton Ltd , the world's biggest miner, gained about 1.4 percent to its highest in nearly 18 months and Newcrest Mining Ltd. , Australia's largest gold miner, rose 0.6 percent.

"There were some gains in gold and oil prices and so that's giving a little bit of momentum to the market," said Juliana Roadley, a market analyst at Commonwealth Securities in Sydney.

Spot gold fell to $1,102.55 an ounce from New York's notional close of $1,105.60.

Copper prices rose to their highest in 16 months as trading in London Metal Exchange contracts resumed after a four-day holiday, chasing gains made in Shanghai over the break.

The gains came after a fall in exchange stocks and threats to supply in Chile. [ID:nN28156122] [ID:nN28167312]

In Japan, shares of exporters that had led recent gains ran out of steam, while trading houses such as Mitsui & Co <8031.T> climbed as commodity prices rose.

"Caution will also 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.

Twenty years ago, 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. The benchmark hit a 26-year closing low last March but has clawed back about 50 percent since then.

Japan Airlines Corp <9205.T> plunged more than 9 percent after sources said a state-backed turnaround fund may seek to put the struggling airline through bankruptcy court as part of restructuring efforts. [ID:nTOE5BR00D]

Shanghai shares <.SSEC> were flat. Shares in Chinese train maker CNR Corp <601299.SS>, which raised $2 billion this month in China's fourth-largest initial public share offering this year, rose 3 percent in a weaker-than-expected debut. [ID:nTOE5BR075]

"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.

The dollar held firm at 91.72 yen and $1.4360 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 Aiko Hayashi in Tokyo) (Editing by Kim Coghill)