Share recovery stalls in Tokyo, yen gyrates

SINGAPORE, March 7 (Reuters) A tentative global share price recovery stalled in Tokyo on Wednesday and the yen gyrated as investors agonised over risk and worried about US economic health in the aftermath of a week-long downturn.

Tokyo's Nikkei <.n225> index fell 0.5 percent, reversing an early gain, and leaving Japan's benchmark index down 8 percent since Feb.

26, when the global stock correction set in.

S&P futures pointed to a weaker opening on Wall Street, but financial bookmakers were expecting London's FTSE 100 to open 16-18 points higher.

Other Asian bourses were higher, helped by the strong U.S.

performance overnight, though some were off their highs. Hong Kong's Hang Seng <.hsi> climbed 0.4 percent and MSCI's index of non-Japan Asian shares <.msciapj> was up 1 percent at 0640 GMT.

Gold was volatile, but NYMEX crude was steady just below a barrel after an overnight climb.

The global flight from risk of the past week was triggered last Tuesday by a sharp fall in Chinese stocks and worries about the U.S.

economy, and some analysts say it has further to run.

''The scenario that the U.S. economy would see a soft landing has been somewhat destroyed,'' said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.

''Although a lot of people, such as policy makers, keep saying the U.S. economy is fine, investors remain worried.'' Among policymakers offering views on Wednesday was U.S. Treasury Secretary Henry Paulson during his three-country tour of Asia. He predicted stable growth for the U.S. economy but made no remarks on financial markets. Click [nL07697630].

Export stocks such as Canon , which fell 2.54 percent, were among the big losers as investors worried about the strength of demand in the United States, Asia's main export market.

Resource heavyweights like BHP Billiton , up 1.4 percent, led gains outside of Tokyo, and the MSCI's index of materials stocks <.msciapjmt> jumped 1.5 percent.

Taiwan's benchmark index <.twii> rose 0.4 percent and Australia's S&P ASX 200 <.axjo> was 0.9 percent higher.

U.S. stocks closed sharply higher on bargain hunting. The Dow Jones industrial average rose <.dji> 1.3 percent and the Nasdaq Composite Index <.ixic> put on 1.9 percent.

YEN BUMPY The yen, which surged in the worldwide asset sell-off, slipped back after U.S. equity markets showed signs of stabilising on Tuesday, but then resumed its rise as Tokyo's stock rally stalled.

Some estimates say investors borrowed more than 0 billion worth of yen at low Japanese interest rates to finance risky investments elsewhere. [ID:nL06554254] As these investments were dumped, the yen soared, reaching three-month highs against the dollar and euro earlier this week.

''It's still hard to take on significant positions,'' said Kikuko Takeda, currency analyst at Bank of Tokyo-Mitsubishi UFJ. ''Even though markets calmed a bit yesterday, investors are still not confident that we're out of the woods yet.'' The dollar was at 116.40 yen , against 116.50 yen in late U.S. trade, after hitting 115.16 yen on Tuesday according to electronic trading platform EBS, its lowest since early December.

The euro was at 152.76 yen against 152.93 yen in late U.S. trade. It dropped to 150.74 yen for the first time since late November in the previous session.

March 10-year U.S. Treasury futures edged up 1.5/32 to 108-25.5/32 but were still off the three-month high of 109-9.5/32 struck on Monday. Near-term chart support at 108-21/43 helped support the contract.

Gold hit an intraday high of 8.25 an ounce, building on Tuesday's gain, and moving further away from its six-week low of 2.30, reached on Tuesday, but it later dropped back below 4.

Tumbling global stock markets forced risk-averse investors to sell portfolio assets, including gold, to cover their losses in the past week, but some analysts see a recovery coming.

''I think the bad time is over. Gold prices will come back to 0 and 0 within 10 days to two weeks,'' said Yukuji Sonoda, precious metals analyst at Daiichi Commodities in Tokyo.

Oil, also supported by the recovery in equity markets, held steady above a barrel as oil dealers forecast a drop in U.S.

gasoline inventories.

News that Royal Dutch Shell had cut Nigerian output by 187,000 barrels per day (bpd) after a spill from a major pipeline in the Niger delta provided further support.

REUTERS PV PM1400