* Asian shares broadly lower; Nikkei slumps on profit
worries
* Indian stocks surge 17 pct on election, pull up MSCI
index
* Safe-haven yen gains broadly; Moody's acts on JGBs
* Oil edges higher, but worries about global demand remain
(Repeats to more subscribers, updates with latest Asian
prices, European open)
By Rafael Nam
HONG KONG, May 18 (Reuters) - Most Asian stock markets fell
on Monday on concerns about corporate profits and a
still-uncertain outlook for the global economy, but Indian
shares surged following the ruling coalition's sweeping
election victory.
Hopes that Congress' victory will usher in a more stable
government -- and with it more certainty on policy and reforms
-- bolstered Indian financial markets, with the rupee rising to
its highest against the dollar in over four months.
India's benchmark 30-share BSE index <> surged more
than 17 percent before trading was halted for the day, pulling
the MSCI index of Asian stocks outside Japan <.MIAPJ0000PUS> to
a 1.2 percent gain, though most individual markets fell.
European shares fell as much as 1.1 percent in early trade,
following the more cautious global trend.
Japanese government bond yields were range-bound while the
yen extended gains after Moody's said on Monday it was raising
local currency ratings on the debt but cutting its foreign
currency credit rating. []
"Recent economic indicators show that the worsening of the
economy appears to have stopped, but now we need to see signs
of recovery or it'll be difficult for stocks to rise
decisively," said Yoku Ihara, manager at the investment
information department of Retela Crea Securities.
Investors are hoping that the global economy's freefall has
bottomed out, though the timing and potential strength of a
recovery are far from clear.
The MSCI index has surged 53 percent from its 2009 low on
March 4 to its yearly high on May 11, but the global equity
rally has shown signs of losing steam in recent days.
U.S. economic reports on Friday were comforting, showing
April consumer prices unchanged and industrial output declining
at a slower pace. []
Confidence is improving among Japanese manufacturers,
according to a Reuters monthly poll, while U.S. consumers in
May were also were optimistic. []
On the other hand, recent weak outlooks from Asian blue
chips such as Panasonic <6752.T> and Sony <6758.T> and other
signs of weakness in Europe are not inspiring confidence.
Data on Friday showed euro zone economies shrank far more
than expected in the first quarter, with Germany posting its
worst performance since reunification, though analysts note the
first quarter may have marked the low point. []
Most major stock indexes in Asia, including those in South
Korea <> and Australia <> fell more than 1 percent
each on Monday.
Japan's Nikkei average <> dropped 2.5 percent, with
shares of exporters under pressure as the yen advanced.
Panasonic slumped 7.6 percent after forecasting a
bigger-than-expected annual loss on Friday, while Australian
mining shares such as BHP <BHP.AX> retreated after a slump in
oil and metal prices.
Hong Kong <> recouped early losses and was little
changed by mid-afternoon.
The clear expection was India, where election-fueled gains
were so strong they triggered two trading halts at the
country's stock exchange.
Prime Minister Manmohan Singh's alliance defied predictions
of a tight election and was only about 11 seats short of an
majority from the 543 seats at stake, according to election
commission data, though the final count see tiny changes.
Government policy in India in past years has been hobbled
by a series of unwieldy coalitions which have been unable or
unwilling to take harsh economic decisions or push through
needed reforms.
The rupee was at 48.31/32 against the dollar, 2.3 percent
above Friday's close of 49.41/42. The partially convertible
currency had risen earlier as high as 48.24, up 8.2 percent
from a lifetime low of 52.20 in March and up 1 percent this
year.
"We believe the election verdict could be game changing for
India, as it enhances the scope for significant medium- and
longer-term reforms that will boost the sustainable growth,"
said Rajeev Malik, Singapore-based economist at Macquarie
Securities.
"This, combined with the ongoing improvements in the Indian
economy, will be highly positive for the economic outlook," he
said.
OIL UNDER PRESSURE
Still the growing caution elsewhere was seen as investors
switch to assets that tend to benefit during volatile times.
The yen, up already on increased risk aversion, gained
further on the Moody's statement, but analysts said the move
just reflected a correction of the discrepancy in which local
currency ratings on the country's debt was higher than for its
foreign currency ratings.
"Lowering the foreign currency bond rating is consistent
with Japan's fiscal burden, which has grown due to the
financial crisis. This downgrade is understandable," said
Masamichi Adachi, senior econoimst at JPMorgan in Tokyo.
The yen strengthened to 94.80 per dollar <JPY=> from about
95.00 per dollar shortly before the statement and to 127.68 per
euro <EURJPY=R> from about 127.92 beforehand.
However, the 10-year JGB yield <JP10YTN=JBTC> was broadly
unchanged at 1.405 percent.
Riskier assets suffered, with oil slumping nearly 4 percent
on Friday amid doubts about the strength of global demand for
energy.
Global energy forecasters have recently downgraded their
forecasts for global energy demand in 2009, with the
International Energy Agency saying the decline in oil
consumption in 2009 would be the steepest since 1981.
U.S. crude futures <CLc1> gained 49 cents to $56.83 a
barrel on Monday.
Some investors also worried about inflation risks in months
ahead as governments and central banks spend trillions of
dollars to stimulate growth and prevent prices from dropping
too much.
Gold <XAU=> held close to a six-week high of $933.65 an
once hit on Friday, as investors sought a hedge against
inflation.
