* US government considering rescue of Fannie,
Freddie-report
* Infosys, POSCO, General Electric reporting results
* Commodity prices high but some see retreat coming
(Repeats to more subscribers)
(Recasts, updates prices)
By Kevin Plumberg
HONG KONG, July 11 (Reuters) - Asian stocks rose and
government bond prices fell on Friday after a report that the
U.S. government is considering taking over the two top U.S.
mortgage finance companies, which have been under fire on fears
they may not be able to get the capital they need to survive.
The dollar climbed broadly and Japanese government bond
futures extended losses on the report.
If problems at Fannie Mae <FNM.N> and Freddie Mac <FRE.N>
persist, Washington will place one or both of the
government-sponsored entities under conservatorship,
essentially meaning U.S. taxpayers would guarantee the
mortgages on their books, the New York Times said, citing
people briefed on the plan. []
Officials involved in discussions stressed that no action
by the administration was imminent, and that Fannie and Freddie
were not considered to be in crisis, the newspaper said.
But the report came as some relief to investors who have
watched Fannie's and Freddie's shares fall 30 percent and 45
percent respectively this week, sparking fresh concern that the
ongoing global credit crisis could have a knock-on effect on
regional economies.
European shares were expected to open slightly higher,
boosted by heavyweight oil stocks as crude oil broke back above
$140 a barrel, and by talk of a potential U.S. government
rescue plan.
"Investors will pounce on any bit of positive news
especially if it involves these mortgage lenders and the U.S.
government," said Mona Chung, fund manager with Daiwa Asset
Management in Hong Kong.
"But this is looks like another short-term fix and we still
can't see the end of the tunnel as far as the turmoil in the
financial sector is concerned," she said.
Japan's Nikkei share average <> was up 0.3 percent,
boosted by bank shares.
General Electric <GE.N> is in final talks to sell its
Japanese consumer finance unit to Shinsei Bank Ltd <8303.T> in
a deal possibly worth more than $3.7 billion, sources familiar
with the matter said. Shares of Shinsei fell 2.4 percent.
[]
Outside of Japan, shares in the Asia-Pacific region
<.MIAPJ0000PUS> were up 1 percent on the day and on the week,
on track for the first weekly gain since mid May.
Japanese government bonds and U.S. Treasuries tumbled, as
investors moved money out of safe-haven debt on the Fannie and
Freddie report.
September JGB futures <2JGBv1> extended losses to the day's
low of 135.58, down more than a half point.
The yield on the 10-year U.S. Treasury note <US10YT=RR>,
which moves inversely to the price, rose to 3.84 percent from
3.80 percent late on Thursday in New York.
The U.S. dollar edged up against the euro and yen after the
New York Times story allayed some fears that the credit crisis
may be spiralling further out of control.
The euro <EUR=> was at $1.5770, down 0.1 percent. The
dollar was trading at 107.12 yen <JPY=>, up 0.1 percent.
OIL APPROACHING A PEAK?
Oil prices climbed back above $141, a nagging reminder of
persistent inflation pressures, but some markets turned higher
as investors found value in beaten down shares.
Crude was holding at $141.70 a barrel <CLc1> after jumping
overnight on threats to production in Nigeria and Brazil, and
aluminium prices hit a record on output cuts in China,
supporting expectations that higher costs will cut into the
bottom line.
Investors were also awaiting results later in the day from
the world's fourth-largest steel maker POSCO <005490.KS>
industrial giant General Electric <GE.N>.
In India, shares Infosys Technologies <INFY.BO> fell 1.4
percent even after the company's quarterly profit beat
expectations.
Disappointing quarterly earnings or dour forward-looking
comments from companies could unleash downward revisions to
profit expectations for 2008 and 2009, analysts said.
Margins have been squeezed by higher costs associated with
commodity prices and slackening consumer spending, particularly
in developed economies.
However, as prices for raw materials such as oil continue
to climb, more and more investors are confident that a sharp
turn lower based on reduced demand is on the horizon.
The rate at which institutional investors are sending
equity capital to large commodity exporting nations such as
Chile and South Africa has been falling fast, according to data
from State Street Global Markets. And the correlation between
cross-border equity flows into exporting nations and market
performance likely peaked at 40 percent in April, the bank
said.
"The macro backdrop also makes falling commodity prices
more likely. Slowing growth and booming commodity markets are
not generally compatible," State Street analysts said in a
note.
Furthermore, equity valuations in Asia ex-Japan have
reached fair value, according to JPMorgan strategist Adrian
Mowat.
In eight out of 12 markets in the Asia-Pacific region
excluding Japan shares are cheaper on a price-to-forward
earnings basis than the average trough valuations of the last
three major financial events of the decade: the Asian financial
crisis, bailout of Mexico and U.S. recession.
"During 2H08, markets will be sensitive to declines in
headline inflation. We recommend that investors buy equities
currently in this environment," Mowat said in a research note.
(Additional reporting by Parvathy Ullatil in HONG KONG)
(Editing by Kim Coghill)
