(Updates with latest prices, details, background)
By Rafael Nam
HONG KONG, Feb 25 (Reuters) - Asian shares rallied on
Monday, sending the Nikkei to a six-week closing high, after
talk of a rescue for a U.S. bond insurer eased worries about
credit-related losses in the global financial sector.
But U.S. recession fears remained in place, pressuring the
dollar against other currencies, while geopolitical concerns in
Iran and Turkey lifted oil prices above $99 a barrel.
European shares were seen opening 1.2-1.5 percent higher,
tracking Asian markets as a rescue plan for Ambac Financial
<ABK.N> could allow the U.S. bond insurer to keep its top
credit ratings and avert sell-downs of the debt it has
guaranteed. []
"People recognise some of the problems that would occur if
we saw the bond insurers downgraded and that's certainly been
weighing on the minds of investors in the last few weeks," said
White Funds Management portfolio manager Angus Gluskie.
"The fact that there's a rescue plan is definitely a
positive and it mitigates one of the risks for the banks."
The MSCI's index of Asian stocks excluding Japan rose 1.1
percent as of 0610 GMT, led by financial firms such as
Australia's Macquarie Group <MQG.AX> and South Korea's Shinhan
Financial Group <055550.KS>.
Still, analysts warned stocks in Asia could remain under
pressure given uncertainty of what else lies in store for
markets that have seen double digit declines this year on the
back of crumbling credit markets and writedowns at global
lenders.
"It's impossible to call an end to it," said Eric Betts,
equities strategist at Nomura Australia.
"First, it was subprime and then different investment banks
and now it's insurers. It has to go all the way through the
food chain probably."
CHINA STOCKS SLIDE
Chinese stocks <> lost 3 percent amid worries of new
share supply, with China Railway Construction aiming for a $5.4
billion Shanghai and Hong Kong listing, and Sinopec <600027.SS>
<0386.HK> sliding on its $4.2 billion convertible bond offer.
Stocks in South Korea <> gained 1.3 percent, helped by
the inauguration of former businessman Lee Myung-bak, while
Taiwan's stocks <> rose 2.2 percent on hopes over improved
business ties with China.
Australian <> stocks gained 1.1 percent, while markets
in Hong Kong <> and Singapore <.FTSTI> up less than 1
percent each.
The Nikkei <> surged 3.1 percent to its highest close
since Jan. 15 thanks to gain in insurers such as Millea
Holdings <8766.T>.
Shares were also bolstered on a media report that China's
sovereign wealth fund planned to buy as much as $10 billion in
Japanese stocks as well as a stake in oil and gas developer
Inpex Holdings <1605.T>. []
Although Asian financial firms have so far avoided the
extent of credit- and subprime-related writedowns at U.S. and
European lenders, markets as a whole have still suffered from a
lack of investor confidence that has spread worldwide.
The prospects of a U.S. recession have also hurt, with the
MSCI index of Asian equities excluding Japan down 11 percent
this year as of Friday.
US RECESSION WORRIES
The dollar stuck near a three-week low against the euro of
$1.4815 <EUR=> on market expectations the U.S. Federal Reserve
will continue lowering interest rates to avert a sharp slowdown
in the world's largest economy.
The Japanese yen <JPY=> was steady against the greenback
but Japanese government bond figures slipped towards a
two-month low as investors added riskier assets to their
portfolios. March 10-year futures <2JGBv1> fell 0.34 point to
137.15.
U.S. crude futures rose 75 cents to $99.56 a barrel
following Iran's warning on Sunday that more U.N. sanctions
would be "costly" to Western powers, sparking talk the world's
fourth-largest oil exporter would cut crude exports.
[]
The gains were also powered after Turkish troops fought
Kurdish PKK rebels in northern Iraq on Sunday. []
Spot platinum <XPT=> slipped to $2,158/2,155 an ounce on
Monday on continued profit-taking, though spot gold <XAU=>
bounced back to $947.90/$948.70 on expectations for lower U.S.
interest rates.
