Asian shares rebound as Wall St soothes nerves

Singapore, Mar 15: Asian shares rebounded more than 1 percent on Thursday following a global sell-off, as a recovery on Wall Street and a falling yen encouraged investors to seek bargains among exporters and other beaten-down stocks.

But caution prevailed, as market players tried to assess the risks of a crisis in the U.S. mortgage sector spilling over into the wider economy and hitting demand for Asian goods.

''The Nikkei has recouped just half the losses it sustained yesterday,'' said Yasuo Yabe, director of sales at Meiwa Securities in Tokyo. ''Investors are pondering whether subprime mortgage problems will have a broader economic impact or not.'' European markets were expected to open sharply higher.

Financial bookmakers in London saw Britain's FTSE 100 up about 1.5 percent, Germany's DAX up about 1.7-1.8 percent and France's CAC 40 1.6-1.9 percent higher.

The Japanese currency extended gains against the dollar and euro as the rebound in stock prices soothed fears that investors may continue to dump riskier assets from their portfolios and pay off the cheap yen loans that had financed them.

Asian share indexes had dived on Wednesday -- most by between 2 percent and 3 percent -- after concern of rising defaults in U.S. mortgage lending prompted the second big wave of selling in global equity markets in recent weeks.

Gold rose, tracking firmer oil prices as U.S. crude extended Wednesday's gains that had been made on the back of declining gasoline stockpiles in the United States.

Japanese government bond yields climbed up from 2-{ month lows, mirroring gains in U.S. Treasury yields, as firmer stock markets reversed the previous session's flight from equities to the relative safety of government debt.

Tokyo's Nikkei rose 1.1 percent -- after falling nearly 3 percent on Wednesday -- while MSCI's broadest index of shares elsewhere in Asia was up 1.5 percent at 0610 GMT.

U.S. stocks posted modest gains on Wednesday, as worries eased that losses for firms operating in the subprime mortgage sector -- which lends to borrowers with a weaker credit history -- might slow economic growth.

Volatile Markets:

Australia's S&P ASX 200 rose 1.9 percent, helped by a 2.3 percent gain for mining heavyweight BHP Billiton, and Hong Kong's Hang Seng rose 0.8 percent.

Stocks benchmarks in South Korea, Taiwan and Singapore gained between 1.2 percent and 1.7 percent.

But traders warned the turmoil that has swept global markets since late February may not have run its full course.

''Until we get a resolution to the issues that we are seeing in the U.S. subprime market, and see what impact it is going to have on the global economy, we are likely to see a lot of volatility,'' said Simon Doyle, head of strategy at Schroder Investment Management in Australia.

The dollar edged up to around 117.15 yen by 0610 GMT, as investors cautiously returned to the so-called carry trade -- borrowing in a low-yielding currency, such as the yen, to buy higher-yielding assets. The euro rose to 154.95 yen ''The risk reduction prompted by concerns about a credit crunch from the shaky U.S. subprime mortgage market has run its course, and that's why the yen has been sold broadly again,'' said Minoru Shioiri, senior manager of FX trading at Mitsubishi UFJ Securities.

''But worries about the health of the U.S. economy are still there to cap the dollar's gains.'' The lower yen helped shares in Japanese exporters, who see the value of their earnings from the key U.S. market grow when the dollar is stronger.

Toyota Motor Corp. rose 1.6 percent, Sony Corp. gained 1.7 percent and Canon Inc. was up 1.1 percent.

The benchmark 10-year Japanese government bond yield rose 2 basis points to 1.585 percent, up from a 2-{ month low of 1.565 percent hit on Wednesday.

Masuhisa Kobayashi, chief JGB strategist at Barclays Capital, said the JGB market has reacted more strongly to the latest anxiety over the U.S. mortgage market than to the initial sell-off in equity markets in late February.

''The latest drop seems to have struck a chord,'' Kobayashi said. ''It may take some time to see how extensive the problem is and how much impact it will have on the U.S. economy.'' U.S. oil rose 37 cents to .53 a barrel, as drops in gasoline inventories in the world's top consumer raised concerns of a supply crunch ahead of the summer driving season.

Gold traded around 4.20 an ounce, up more than from its level late in New York on Wednesday, when it had fallen to its lowest level in a week at 6.50.

Reuters

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