* Citigroup results bring relief to stocks
* Overall, quarterly earnings are mixed
* UK's Blanchflower says Britain heading for
recession-report
(Updates prices, adds quote, comments and European outlook)
By Kevin Plumberg
HONG KONG, July 21 (Reuters) - Asian stocks rose by more
than 3 percent on Monday, the most in four months, helped by
results from Citigroup that reassured about the financial
sector's stability, though the U.S. dollar slid ahead of more
results from banks this week.
Oil prices edged up but are still more than $17 below this
month's record high above $147 a barrel, a fall that has also
supported shares of exporters in the region.
European stocks are expected to inch higher and extend a
three-day rally, according to financial bookmakers.
But analysts were reluctant to call an end to the fall in
global stocks, which are still down nearly 20 percent from
their peak late last year, saying much depended on how
quarterly earnings look at banks such as Bank of America Corp
<BAC.N> or industrial companies such as Caterpillar Inc <CAT.N>
and Honda Motor Co <7267.T>.
"It is too premature to assume that the bull market is
coming back," said Albert Hung, chief investment officer at
Alleron Investment Management in Sydney.
"There are some concerns that the earnings growth forecast
for fiscal 2009 is still too high so there may be some earnings
revision downwards."
The MSCI index of Asia-Pacific shares outside of Japan
<.MIAPJ0000PUS> was up 3.1 percent on the day, the biggest
single-day gain since March 25.
The rise on Monday broke a steep downtrend that has
persisted since May 19, though certainly kept intact a much
broader declining trend that began in October.
Markets in Japan were closed for a public holiday, thinning
liquidity in the region.
Hong Kong's Hang Seng <> rose 3 percent, with HSBC
<0005.HK> leading the way after The Sunday Telegraph reported
China's sovereign wealth fund was in talks to buy shares in the
bank in the open market. []
South Korea's benchmark KOSPI <> jumped 3.5 percent,
led by gains in the shares of index heavyweights Samsung
Electronics <005930.KS> and the world's fourth-largest steel
maker POSCO <005490.KS>.
Immediate concerns about the global impact of a weak U.S.
financial sector have eased after Citigroup <C.N>, the largest
U.S. bank, reported a second-quarter loss of $2.5 billion,
which was smaller than expected. []
All eyes continue to be on Wall Street for indications of
any stress, which could reverberate globally. The correlation
between the MSCI Asia ex-Japan index and the KBW Bank index
<.BKX>, which includes 24 major bank stocks, has risen to 0.95
in the last three months, up from 0.54 over the last year,
according to Reuters data.
BANKS COULD KEEP PUSHING UP STOCKS
However, the picture painted by higher-than-expected
results from JPMorgan <JPM.N>, Citigroup and IBM <IBM.N> was
tainted somewhat by lower-than-forecast results from technology
sector bellwethers such as Google Inc <GOOG.O> and Microsoft
Corp <MSFT.O>.
In addition, food and energy prices -- though well off
their peaks -- continue to fuel inflation at a time when the
global economy is slowing down.
Global asset-allocation strategists with JPMorgan said they
are staying overweight countries that have done a lot to
control inflation such as Mexico, Taiwan and Thailand against
those that have not done enough, including India and Brazil.
"Given extreme bearish positions and a positive tone from
earnings reports, it is quite likely that equities will see a
further upmove in coming weeks on shortcovering. Into August,
though, economic news will likely remain negative," they said
in a note sent to clients.
Indeed, Bank of England policymaker David Blanchflower told
a UK newspaper the British economy is heading into recession
and the benchmark interest rate should fall "well below" the
current 5 percent. His comments weighed on sterling.
[]
The U.S. dollar, which rose broadly last week, slipped
against the euro and the yen on Monday ahead of the raft of
bank earnings this week that will provide the latest test for
sentiment on the financial sector.
"JPMorgan and Citi might have done OK, but this week brings
reports from WaMu and Wachovia, two institutions that have been
singed by the subprime debacle," said David Watt, a senior
currency strategist at RBC Dominion Securities.
The euro rose 0.1 percent to $1.5857 <EUR=>, about two
cents below an all-time high touched last week. Against the
yen, the dollar was down 0.1 percent at 106.77 yen <JPY=>.
Crude prices edged up from late New York levels <CLc1> but
remained below $130 a barrel as talks between world powers and
nuclear ambitious Iran, the fourth largest oil exporter, proved
inconclusive.
Still, oil fell 11 percent last week, the biggest
percentage decline since December 2004, on the view that
consumer and industrial demand is slowing.
(Additional reporting by Geraldine Chua in SYDNEY; Editing by
Lincoln Feast)
