* Markets lower expectations of U.S. interest rate
increases
* Asian stocks edge higher despite a fall on Wall Street
* Higher inflation seen as corn and soybean sharply up
By Anshuman Daga
SINGAPORE, June 18 (Reuters) - Asian shares edged up on
Wednesday to extend a fragile two-day rise, as oil dipped for
the fourth straight session, signalling lower costs for firms
following a plan by top exporter Saudia Arabia to raise crude
output.
The dollar steadied against the yen after slipping the
previous day, while Japanese government bond futures rallied on
Wednesday, boosted by receding expectations for aggressive
interest rate increases in the United States and Europe.
"We believe that risks to growth have been overlooked by
the markets, and expect the focus to shift back to growth
sooner rather than later," UBS economists said in a note.
"To make verbal support on the dollar credible, policy
action will be necessary to back up the market's view on future
rate hikes. However, as both the housing market and the outlook
of financial corporations remains at risk, any tightening in
rates is unlikely soon," it said.
By 0250 GMT, dollar stood at 107.96 yen <JPY=>, steady from
late U.S. trading on Tuesday, having retreated from a
four-month high of 108.59 yen hit on trading platform EBS on
Monday.
The euro was steady from late U.S. trade at $1.5517 <EUR=>,
having rebounded from a one-month low of $1.5303 hit on Friday.
Soaring energy costs pushed U.S. producer prices sharply
higher last month and U.S. housing starts fell to their lowest
in 17-years, data showed on Tuesday, highlighting the dilemma
the Federal Reserve faces in trying to tackle high inflation
amid signs of weak economic growth. []
Japan's Nikkei share average <> ended the morning
session 0.4 percent higher, led by electronic equipment makers.
NEC Electronics <6723.T> rallied 10 percent after Goldman Sachs
upgraded its recommendation on the stock, citing possible
forecast-beating earnings from the company.
The MSCI index of stocks in the Asia-Pacific region outside
of Japan <.MIAPJ0000PUS> rose as much as 0.36 percent before
paring gains to be up 0.2 percent.
Among Asia's indexes, South Korea's KOSPI <> added 0.3
percent and Hong Kong's <> crept up 0.2 percent.
The Asian gains came even though major U.S. stock indexes
fell on Tuesday, hit by a sell-off in banks.
FED ON HOLD
The Federal Reserve is now seen almost certain to keep its
benchmark rate at 2.0 percent at a two-day meeting next week.
By late U.S. trade on Tuesday, futures dealers had reduced
the implied chance for a rate rise at the August Federal Open
Market Committee to 52 percent from 90 percent on Monday.
Banking shares led the sell-off on Wall Street after
Goldman Sachs analysts said the sector may need to raise $65
billion of additional capital to cope with mounting losses from
the credit crisis that they do not expect to peak until 2009.
Oil prices eased on Wednesday, with U.S. crude futures for
July <CLc1> down 61 cents at $133.40 a barrel, taking four-day
losses to over 2.4 percent. The contract briefly hit a record
of nearly $140 on Monday.
OPEC kingpin Saudi Arabia has promised to ramp up
production to its fastest rate in decades, UN chief Ban Ki-moon
was quoted as saying last weekend.
Crude's near-40 percent surge so far this year has fuelled
fears of lower consumer demand and business investment around
the world and confounded central bankers caught between
sluggish global growth and rising inflation.
Pointing to more inflationary pressures ahead, U.S. corn
and soybean prices closed near record highs on Tuesday as
flooding in the U.S. Midwest damaged U.S. crop prospects.
In the Japanese government bond market, September 10-year
futures jumped 0.72 point to 133.87 <2JGBv1>. Last week, the
lead contract fell as low as 132.05, its lowest since July last
year.
Gold <XAU=> prices fell to $882.85/883.85 an ounce from
$884.20/885.40 late in New York on Tuesday.
