* Strong growth in Asia fuels expectations for rate rises
* Japan bucks trend, 5-year govt bond yield hits 4-year low
* Australia, New Zealand dlrs rise with carry trade back
* Profit taking weighs on Asia stocks ahead of China data
* Will oil snap 6-session losing streak?
By Kevin Plumberg
HONG KONG, Dec 10 (Reuters) - Government bonds in Australia
and South Korea fell on Thursday as investors pushed forward
expectations for interest rate rises in 2010 because of bullish
growth views, while Asian stocks slid on year-end profit
taking.
Major European stocks were seen broadly higher as investors
take a breather after the recent selling streak. Britain's FTSE
100 <> was seen down 4 points to up 1 point at open,
Germany's DAX <> up 4 to 6 points, and France's CAC-40
<> up 7 to 8 points.
A deluge of Chinese economic data on Friday is expected to
underscore that Asia's growth rate will continue to lead the
global economy and support a premium on regional asset prices.
However, sovereign credit rating risks in other parts of
the world bubbled below the surface. Standard & Poor's cut its
outlook on Spain to negative, after Fitch cut Greece's debt
rating and Moody's reminded this week that the United States
could lose its top rating in 3-4 years if its fiscal situation
deteriorates. []
The 3-year December Australian government bond future fell
0.1 point to 95.12 <YTTc1> after hitting a 4-month high last
week Tuesday.
The prospect of a greater interest rate advantage attracted
dealers looking for yield to the Australian dollar, which rose
as high as US$0.9175 before settling back to $0.9125 <AUD=>, up
0.5 percent on the day.
The New Zealand dollar <NZD=> also was up 0.5 percent to
US$0.7227 on hawkish comments from its central bank, which
signalled it may start raising rates in April, pulling back
from an earlier pledge to stand pat until late 2010.
[]
Australia's economy has generated nearly 100,000 jobs in
the last three months, a standout among advanced economies that
makes a fourth consecutive central bank base rate increase in
February increasingly likely. []
"All the jobs were full-time, the participation rate is
holding strong and it increasingly looks like the unemployment
rate has peaked," said Brian Redican, senior economist with
Macquarie. "A hike in February looks more and more likely."
Shorter-maturity bonds were also hit in South Korea, where
the head of the Bank of Korea said rates were too low given
economic growth prospects and the central bank could not wait
for employment to pick up before lifting borrowing costs.
[]
Eight of 11 analysts polled on Thursday expect Korean
policy rates to rise in the first quarter of 2010, compared
with earlier this week when another poll showed the majority
expecting a rate increase in the second quarter or later.
[]
JAPAN IS AN EXCEPTION
In Japan, investors snapped up medium-term government bonds
ahead of new money market operations to increase liquidity in
the banking system. The 5-year Japanese government bond fell to
the lowest since July 2005 at 0.45 percent before edging back
up to 0.465 percent <JP5YTN=JBTC>.
The Nikkei share average in Tokyo <> tumbled 1.4
percent, with investors finding sovereign credit risk was a
good reason to take profits. The Nikkei, though, remains up 3.6
percent on the month compared with the S&P 500 <.SPX>, which is
flat in December.
A 6.5 percent fall in the shares of Suzuki Motor <7269.T>
was the fourth-largest drag on the Nikkei as dealers questioned
the stock's high valuation despite optimism surrounding an
alliance with Volkswagen.
Indeed, Suzuki is trading at about 1.5 times its 12-month
forward book value, above the industry average of 1 times,
Thomson Reuters Starmine shows.
"We believe the firm will benefit from the technology
alliance with Volkswagen, but anticipation of tie-up news has
already driven its valuation... considerably higher (than those
of its Japanese rivals)," said Morgan Stanley analyst Noriaki
Hirakawa.
The MSCI index of Asia Pacific stocks outside Japan eased
0.3 percent <.MIAPJ0000PUS>, with the consumer discretionary
and technology sectors the biggest drags on the index.
The Thomson Reuters index of Asia ex-Japan equities was
down 0.5 percent <.TRXFLDAXPU>.
U.S. crude for January delivery <CLc1> shed small gains
during the session as equities declined, to trade down 0.2
percent at $70.56 a barrel. Oil has fallen now for six straight
sessions.
(Additional reporting by Aiko Hayashi in TOKYO; Editing by Kim
Coghill))
