* Greater China stocks lead Asia higher
* Asia, U.S., Europe equity markets all in bear market
* Earnings views could slip because of stagflation
(Updates prices, adds European outlook)
By Kevin Plumberg
HONG KONG, July 7 (Reuters) - Asian stocks rose on Monday,
snapping a six-day losing streak on optimism that China's
banking sector has thrived despite market turmoil and
bargain-hunting investors picked over battered shares.
However, fears that stagflation would hit company earnings
and continue to depress consumer spending kept enthusiasm under
wraps as European, Asian and U.S. equity markets all lingered
in bear market territory.
European stocks were expected to open modestly higher
thanks to a dip in oil prices, according to financial
bookmakers in London. Worries about the European banking sector
could limit gains after a Swiss newspaper reported on Sunday
authorities could require UBS <UBSN.VX> and Credit Suisse
<CSGN.VX> to set aside an additional 70 billion Swiss francs
($68.29 billion) in capital.
Oil prices slipped under $144 a barrel as the U.S. dollar
rose while corn and soybean prices slid, but with regional
stocks persistently down more than 20 percent from cycle highs
-- the common definition of a bear market -- investors sought
safety, stability and perhaps some cheap stocks.
"Investors shouldn't feel too gloomy about the stock market
since most shares have become cheaper after recent losses,"
said Michael On, managing director of Beyond Asset Management
in Taipei.
CHINA LEADS
Greater China markets led the region higher. The Shanghai
composite <> jumped 4.2 percent on hopes the index had
found a near-term floor, bouncing from a 17-month low plumbed
last week.
Hong Kong's Hang Seng index <> gained 1.5 percent,
helped by banks such as China Merchants Bank
<3968.HK><6013968.SS>, which forecast on Friday its first-half
net profit more than doubled, following a positive earnings
comment from Industrial & Commercial Bank of China on Thursday
<1398.HK>.
Japan's Nikkei share average <> finished 0.9 percent
higher, breaking the longest losing streak since 1954. The
biggest percentage gainers on the index on Monday had
underperformed the Nikkei by up to four percentage points last
month.
Shares in the Asia-Pacific region traded outside of Japan
edged up 0.3 percent, according to an MSCI index <.MSCIAPJ>.
Earlier the index touched its lowest intraday level since
August 2007 when trouble in the U.S. subprime mortgage market
turned into a full-blown credit crisis.
The pan-Asia index <.MIAS00000PUS> rose for the first time
since June 26, up 1 percent, but is still down close to 16
percent this year.
With U.S. aluminium company Alcoa Inc <AA.N> and General
Electric <GE.N> kicking off the earnings season this week,
worries about falling profits weighed.
"What could be the big negative surprise the market has not
yet fully taken into account? We think it might come from the
corporate sector," said Garry Evans, Asia-Pacific equity
strategist with HSBC in Hong Kong.
"The risk of an earnings recession comes looming into view.
We think, therefore, that the bear market still has quite a
long way to go to work itself out," Evans said in a note.
FX INTERVENTION FUTILE?
The Korean won rose sharply after finance officials starkly
warned of stern measures to boost the currency and try to curb
inflation. []
That attempt was the latest by policymakers in the region
to put a floor under their currencies to relieve upward price
pressures that have been plaguing their countries.
However, some analysts believe the toxic combination of
feeble growth and high inflation known as stagflation, is too
large of a force to beat.
"The best they can hope for, in our view, is to engineer an
orderly decline through a smoothing operation. And maybe
Vietnam cannot even achieve that," said Stewart Newnham,
currency strategist with Morgan Stanley in Hong Kong.
The U.S. dollar was down 0.6 percent against the won at
1042.60 <KRW=>.
The euro fell 0.3 percent against the dollar to $1.5640
<EUR=>, ahead of two speeches this week from Federal Reserve
Chairman Ben Bernanke, which could reignite expectations for
interest rate rises to curb inflation.
Against the yen, the dollar climbed to 107.27 yen <JPY=>,
up 0.5 percent.
Crude prices fell to $143.75 a barrel <CLc1>, although
uncertainty was rife after Iran, the world's fourth largest oil
exporter, reasserted its right to pursue uranium enrichment.
Last week, oil rose to a record high of $145.85 and has risen
about 50 percent so far this year.
(Additional reporting by Gina Chang in Taipei; Editing by
Lincoln Feast)
