* US govt considering rescue of Fannie, Freddie-NY Times
* POSCO, General Electric reporting results
* Commodity prices high but some see retreat coming
(Repeats to more subscribers)
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 helped soothe fears about further
fallout from the global credit crisis.
The dollar also climbed after the New York Times said
Washington may place Fannie Mae <FNM.N> and/or Freddie Mac
<FRE.N> under conservatorship if problems at the
government-sponsored entities worsen.
That essentially means U.S. taxpayers would bear any losses
on the $5 trillion in mortgages the companies hold or
guarantee, the newspaper said, citing people briefed on the
plan, who stressed no action was imminent. []
Markets reacted with relief after watching Fannie's and
Freddie's shares fall 30 percent and 45 percent, respectively,
this week on fears they may not be able to get the capital they
need to survive.
"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.
European shares were expected to open up to 0.9 percent
higher, boosted by heavyweight oil stocks as crude oil broke
back above $140 a barrel, and by talk of the potential U.S.
government rescue plan.
Japan's Nikkei share average <> closed down 0.2
percent, while shares elsewhere in the Asia-Pacific region
<.MIAPJ0000PUS> were up 1.3 percent by 0630 GMT, heading for
the first weekly gain since mid-May.
BONDS FALL
Japanese government bonds and U.S. Treasuries tumbled as
investors moved money out of safe-haven debt on the Fannie and
Freddie report.
"If true, this has major implications for the Treasury
market -- bad, clearly, without a doubt," said a trader at a
U.S. investment bank in Tokyo.
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 on
expectations the U.S. government would act to prevent the
credit crisis from 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?
Commodity prices remained high, keeping inflation concerns
to the fore.
Crude topped $142 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> and
industrial giant General Electric <GE.N>.
Earnings forecasts globally have been revised down as
margins are squeezed by higher costs 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.
"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 region, 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 and
Lincoln Feast in SINGAPORE)
