* Nikkei up 0.1 percent, MSCI Asia ex-Japan gains 0.6
percent
* European bourses seen opening down 0.2-0.5 percent
* Euro breaches 120 yen, close to 5-month high against
dollar
* U.S. crude rises above $108 a barrel
By Alex Richardson
SINGAPORE, April 4 (Reuters) - Asian shares rose to their
highest in nearly 3 years on Monday after strong U.S. jobs
growth spurred optimism about the global economy, while the euro
hit an 11-month peak against the yen amid expectations of a euro
zone rate hike later this week.
But European shares were seen dipping after hefty gains at
the end of last week, with investors turning more cautious ahead
of policy meetings later in the week by the European Central
Bank and Bank of England.
"As the economy turns the corner and gets back on its feet,
central bankers are beginning to see inflation as a greater
threat than lack of growth," said Jonathan Sudaria, dealer at
Capital Spreads.
Bookmakers called the major European indexes to open down
0.2-0.5 percent, while S&P 500 futures <SPc1> eased 0.2 percent,
pointing to a weaker start for U.S. shares.
U.S. crude oil rose to its highest in 2-1/2 years as unrest
in the Middle East and fighting in Libya stoked fears of supply
disruptions. Gold edged up, supported by crude prices and the
stronger euro.
Data showing U.S. employment grew solidly for a second month
in March boosted Wall Street on Friday. Investors interpreted it
as a sign of a strengthening economic recovery, although most
analysts did not expect it to prompt the Federal Reserve to
change its ultra-loose monetary policy for the time being.
In contrast, the ECB Bank is seen as almost certain to raise
borrowing costs by 25 basis points on Thursday, supporting the
single currency despite worries about the crushing debt burden
of some euro zone countries.
Most Asian central banks -- with the major exception of
Japan -- have already begun tightening due to concerns about
inflation and asset bubbles, contributing to a patchy
performance of the region's equity markets so far this year.
"Share market valuation is at best neutral for Asia-ex-Japan
but rising inflation and worries about policy tightening means
that returns could lag the rest of the world this year," said
Andrew Pease, chief investment strategist Asia-Pacific at
Russell Investments.
UNCERTAIN OUTLOOK
Japan's Nikkei gave up some early gains to finish up
0.1 percent, supported by gains on Wall Street on Friday, when
the S&P 500 rose 0.5 percent.
"Firmness in U.S. shares and the weakness of the yen,
especially against the euro, encouraged buying in the
export-related sector," said Mitsushige Akino, chief fund
manager at Ichiyoshi Investment Management in Tokyo.
The weakening yen may help Japanese exporters, although the
outlook for Japan remains clouded by uncertainty over the full
cost of a devastating earthquake and tsunami on March 11.
Big Japanese manufacturers expect business conditions to
worsen in the next three months, responses to a Bank of Japan
survey collected after the quake showed, as rolling power
blackouts and a nuclear safety crisis threaten to delay the
return to a moderate economic recovery. []
Although it has recovered more than two-thirds of the ground
lost during its steep tumble in the aftermath of the quake, the
Nikkei remains around 5 percent below its March 11 close.
MSCI's broadest index of Asia Pacific shares outside Japan
rose 0.6 percent and touched its highest level
since May 2008, its second near 3-year peak in as many sessions.
Emerging markets -- led by Asia -- saw their first monthly
gain of the year in March, outperforming world and developed
market stocks for the first time since September, strategists at
Citi said in a note.
Data from fund tracker EPFR Global on Friday showed
investors returning to emerging market equity funds, with the
end of March seeing the second largest weekly inflow this year,
although the first quarter still showed the largest outflow
since the third quarter of 2008.[]
EURO GAINS
The euro traded around 119.80 yen , after
breaching the 120 yen level for the first time since last May.
The dollar was steady at 84.15 yen , having reached a
six-month high around 84.72 on Friday.
Investors are positioning for an increase in the ECB's key
interest rate to 1.25 percent, widening the euro zone's yield
advantage over the United States, Britain and Japan, where
policy rates remain at record lows.
The euro slid around 20 percent against the dollar between
November 2009 and the middle of last year, but has been on a
broadly appreciating trend since then.
Against the dollar, the single currency hit a five-month
high against of $1.4269 on trading platform EBS earlier on
Monday, having gained a lift from some stop-loss buying, traders
said, and was later buying around $1.4230 .
"Coming into the ECB meeting this week, we have to
anticipate further euro gains," said Todd Elmer, currency
strategist at Citi in Singapore.
The Bank of Japan is likely to downgrade its economic
assessment this week, which is likely to weigh on the yen. The
currency has been under pressure since a rare coordinated G7
intervention to weaken it last month.
Market players have even started talking about a return of
the yen "carry trade", the strategy of using cheap yen loans to
fund investments in higher yielding assets or currencies.
U.S. crude oil CLc1> edged up 0.4 percent to $108.34 a
barrel, having risen as high as $108.74 earlier in the session,
while Brent crude <LCOc1> was up 0.4 percent at $119.15. Gold
traded around $1,430 an ounce.
"We have supply concerns which we haven't had for the last
few years and this is mostly related to Libya now," said John
Vautrain of energy consultancy Purvin and Gertz. "The tension
has disrupted crude supplies, and that is affecting Europe."
Japanese government bond 10-year futures were little changed
ahead of a 2.2 trillion yen auction on Tuesday, seen as a litmus
test of investor appetite in the new financial year, while the
benchmark 10-year yield rose 1.5 basis point to 1.29 percent.
(Editing by Kim Coghill)
