GLOBAL MARKETS-Asian shares rebound; investors play it safe

                                
 * Asian shares edge higher; but investor mood cautious
                                
 * Dollar dips as safe-haven flows ease
                                
 * Gold seen breaking $1,000 barrier in signs of tension
                                
 * Muted reaction to BOJ policy meeting outcome
                                
 By Rafael Nam
                                
 HONG KONG, Feb 19 (Reuters) - Asian shares edged higher on
Thursday as recent selling pressure eased and safe-haven buying
of the dollar and gold subsided, but reminders of the global
economic gloom and financial sector woes kept investors
cautious.
                                
 Weak U.S. housing and industrial output data, along with
concerns that worsening economies in central and eastern Europe
could put more pressure on European banks, suggested more
weakness in global markets.
                                
 European shares were set to open slightly lower, with the
focus on corporate earnings. French lender BNP Paribas
<BNPP.PA> posted an unexpected fourth quarter loss on Thursday
and said market conditions would be tough in 2009.
[ID:nL0192620]
                                
 Policy makers and central bankers continue to step into the
fray. The Bank of Japan left interest rates at 0.10 percent as
widely expected, but extended its commercial paper buying
scheme and pledged to boost supply of low cost funds as it
battles the worldwide credit crunch. [ID:nT220574]
                                
 The uncertainty over the effectiveness of these measures
could keep some safe-haven assets in demand in the short-term,
with analysts anticipating gold will break the $1,000 barrier
soon.
                                
 "Gold is a relative choice. It is benefiting from
instability in the global economy, fears of super inflation in
the coming years and investor aversion to more complicated,
riskier assets, like hedge funds," said Naomi Suzuki, an
analyst at SCM Securities in Tokyo.
                                
 The MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> gained 0.3 percent as of 0720 GMT, but it was
still down about 6 percent for the week.
                                
 Data on Wednesday showed U.S. housing starts and building
permits dropped to record lows in January, while U.S.
industrial output fell more than expected last month.
[ID:nN18424301]
                                
 These reports come as European banks post losses and as
central and eastern European currencies suffer because of
concerns about the region's rapidly cooling economies and heavy
foreign debt. [ID:nLI247678] and [ID:nLI344803]
                                
 Despite actions by policy makers -- including the U.S.
pledge on Wednesday of up to $275 billion to help stem a wave
of home foreclosures -- investors remained wary about the
market outlook. [ID:nLI431726]
                                
 In Asia, Japan's Nikkei <.N225> rose 0.3 percent after
hitting four-month lows on Wednesday and Australia <.AXJO>
advanced 1 percent. Shares in Shanghai <.SSEC> and Taiwan
<.TWII> gained 0.6 to 0.7 percent each.
                                
 But Singapore <.FTSTI> shares fell more than 1 percent,
while South Korea <.KS11>, and Hong Kong <.HSI> posted more
modest losses.
                                
 ELUSIVE RECOVERY
                                
 The optimism at the beginning of the year that a global
economic recovery could be at hand by the second half is
dissipating.
                                
 The U.S. Federal Reserve projected the world's largest
economy would shrink by between 0.5 percent and 1.3 percent
this year, minutes of its late January policy meeting showed.
[ID:nN18452208]
                                
 In its previous quarterly forecast in October, the Fed had
seen a decline of 0.2 percent to growth of 1.1 percent this
year.
                                
 Gold prices <XAU=> slipped about $9 to $975.10 an ounce on
Thursday after hitting a new seven-month high in early trade.
The peak for bullion stands at $1,030.80 hit in March, when
record oil and uncertainties in the dollar's outlook spurred
buying.
                                
 The dollar dipped 0.4 percent from late New York trade to
93.45 yen <JPY> but stayed firm overall due to its safe-haven
appeal, which has helped push the U.S. currency this week to a
six-week high against the yen and a three-month peak against
the euro.
                                
 The euro climbed 0.4 percent to $1.2585 <EUR=>.
                                
 The yen, long supported by safe-haven flows, could come
under pressure due to worries about the contracting Japanese
economy and political uncertainty as voter support for Prime
Minister Taro Aso sinks.
                                
 "There is an emerging view that the yen may not be so
appropriate to buy, unlike before, at times of risk aversion,"
said Minoru Shioiri, chief manager of currency trading at
Mitsubishi UFJ Securities
                                
 The euro edged up 0.1 percent against the Japanese currency
to 117.60 yen <EURJPY=R>.
                                
 Despite early signs of more stability some Asian emerging
currencies continued to slide. The won <KRW=> dropped nearly 1
percent to 1,480.9/2.1 even after South Korea on Thursday
dismissed concerns that local banks might fall under the weight
of their foreign debts. [ID:nSEO219955]
                                
 Trading was largely subdued in several asset classes.
                                
 Oil prices were up 9 cents at $34.71 a barrel, while in
Japan, the benchmark 10-year government bond yield
<JP10YTN=JBTC> climbed 1 basis point to 1.260 percent.