* Investors greet steady Fed with cautious optimism
* Government bonds rise as tightening expectations recede
* Euro rises to record high vs yen ahead of ECB meeting
(Updates with close of Japanese stock market, adds European
outlook)
By Kevin Plumberg
HONG KONG, June 26 (Reuters) - Asian stocks and government
bonds rose on Thursday after the Federal Reserve kept rates
steady and signalled it was in no hurry to raise them in the
near term, relieving investors who had feared aggressive
increases to fight inflation.
European stock futures <STXEU8> fell 0.9 percent,
indicating a lower market open, dragged by energy-related
shares because of oil's dip below $135 a barrel, according
financial bookmakers.
Shares were supported by Fed comments downplaying the
potential for a deeper U.S. economic slowdown. But uncertainty
about inflation kept gains in check and fuelled a rise in the
euro to an all-time high against the yen on expectations the
European Central Bank would raise rates next week.
The U.S. central bank's statement supported government bond
prices that had been sold off sharply on expectations central
banks around the world would tackle price pressures
aggressively.
Still, given that oil prices have climbed some 40 percent
so far this year and persistent rises in food prices, investors
were cautious about the region's outlook.
"We've probably seen the worst, but how much better it's
going to get in the short term is questionable," said Tony
Russell, senior equities adviser at ABN AMRO Morgans in Sydney.
Hong Kong's Hang Seng index rose 0.4 percent <>. Shares
of conglomerate Hutchison Whampoa <0013.HK> rose 2 percent and
were one of the biggest lifts to the index after brokerage CLSA
upgraded its rating on the stock to buy.
The MSCI index of stocks in the Asia-Pacific region
<.MIAPJ0000PUS> outside of Japan rose 0.7 percent, while the
pan-Asia index gained 0.2 percent <.MIAS00000PUS>. Both indexes
hit the lowest since March on Wednesday.
Stocks in Australia led Asia higher, gaining 1.1 percent
<>. The country's four largest retail banks, which have
been beaten up in recent sessions were among the biggest
boosts.
Japan's Nikkei share average <> ended the session
slightly lower, extending a losing streak to six days.
As the second quarter winds down, investors are licking
their wounds on what has been a vicious three months for bonds
and a winding road for equities.
The benchmark yield on the 10-year U.S. Treasury note
<US10YT=RR> is set for the biggest quarterly rise in three
years, as increased expectations about future inflation
triggered a sharp sell-off.
Global stocks shed all of their gains from earlier in the
quarter and will likely end the three-month period largely
unchanged.
A survey from HSBC showed 10 percent of fund managers
surveyed had an underweight view on equities compared with 38
percent in the prior quarter.
However, uncertainty is rife. Asia's initial public
offering market is headed for its worst second quarter since
2003, according to preliminary Thomson Reuters data, as global
market turmoil saw IPOs pulled or priced at steep discounts to
peers.
Bankers do not expect the situation to improve in the
second half. []
JAPANESE BOND YIELDS DIP
Japanese government bond yields, which move inversely to
prices, dipped as investors scaled back expectations for Bank
of Japan interest rate rises in the wake of the Fed's
less-hawkish-than-expected policy decision.
The benchmark 10-year yield <JP10YTN=JBTC> shed 3 basis
points to 1.645 percent, the lowest in a month.
The two-year yield <JP2YTN=JBTC> also fell 3 basis points
to 0.82 percent.
The euro hit a record high against the yen as investors
looked at the potential for a widening gap between euro zone
and Japanese interest rates.
The ECB has maintained a hawkish stance against inflation,
raising expectations it could increase interest rates next
week. Bank of Japan rates are seen on hold for a while.
The euro climbed above 169.20 yen <EURJPY=>, its highest
level against the yen since the single European currency was
launched in 1999.
The U.S. dollar also gained against the yen, up 0.1 percent
at 107.95 yen <JPY=>. The euro was up 0.1 percent against the
dollar at $1.5680 <EUR=>.
Oil <CLc1> slipped 61 cents to $133.94 a barrel on Thursday
after dropping more than $2 on Wednesday as U.S. government
data showed a surprise increase in domestic crude stocks last
week.
"The surprise rise in U.S. crude stocks has pointed to a
weakening demand outlook in the U.S.," said Gerard Burg, a
commodities analyst at National Australia Bank in Melbourne.
"The market will focus on the U.S. economic data due later
today to get a clearer picture of the economy and its impact on
oil demand."
