(Repeats unchanged to broader subscriber base)
By Lincoln Feast
SINGAPORE, Feb 21 (Reuters) - Stocks rallied on Thursday as
solid earnings and expectations of further U.S. interest rate
cuts outweighed worries aboutinflation even as oil hit a record
high above $101 a barrel.
Gold <XAU=> also hit a record above $945 an ounce, and
silver touched a 27-year high, as funds poured into a wide
range of commodities, betting they will outperform in an
environment where growth is slowing and prices are rising.
Data on Wednesday showed a faster-than-expected rise in
U.S. consumer prices last month and further weakness in the
housing market there. []
"The U.S. is entirely focused on the economic data that is
coming out and we're getting revised forecasts for their
economic growth in the downward trend," said Savanth Sebastian,
equities economist at CommSec in Sydney. "(The Federal Reserve)
will have to cut rates and the possibility of that is boosting
sentiment."
The weak housing market and problems in the credit market
prompted the Fed to lower its 2008 U.S. economic growth
forecasts on Wednesday, with analysts interpreting comments as
paving the way for further reductions in borrowing costs.
[]
Japan's benchmark Nikkei <> rose 2.1 percent, trimming
most of Wednesday's losses, while MSCI's index of other Asian
stocks <.MIAPJ0000PUS> gained 1.2 percent by 0247 GMT.
Since tumbling more than 10 percent in January, Asia stocks
have endured choppy, volatile trade and investors are wary of
calling an end to that.
"It's like a Japanese saying about a winter season around
this time; three cold days and four warm days," said Katsuhiko
Kodama, senior strategist at Toyo Securities.
Taiwan stocks <> rose 1.6 percent, in line with Hong
Kong <>, but Shanghai <> fell more than 2 percent on
concerns about further new share issues flooding the market.
Australian stocks <> added 1 percent, helped by solid
earnings from phone company Telstra <TLS.AX>, pallet maker
Brambles <BXB.AX> and national carrier Qantas <QAN.AX>.
CREDIT CONCERNS
While equities have been running hot and cold, commodity
markets have blazed higher.
"There's been a movement of investment funds from other
asset classes to commodities again, and I think gold has
benefited from that move," said Darren Heathcote of Investec
Australia.
Crude oil <CLc1> hit a peak of $101.32, near its all-time
inflation adjusted high of $101.70 hit in April 1980, according
to the International Energy Agency.
Gold's rise lifted silver <XAG=> to $17.90 an ounce, its
highest since December 1980, and Malaysian palm oil futures
<KPOK8> also hit a record high.
Asian technology companies led the way up after a strong
profit outlook from computer and printer maker Hewlett-Packard
Co <HPQ.N>, which lifted Wall Street indexes by nearly 1
percent.
"HP's forecast-beating profits indicated tech product
demand in the U.S. market has not been hit by the subprime
crisis as hard as investors had worried," said James Wang,
chief investment officer of Capital Securities Investment Trust
in Taiwan.
But credit markets highlighted the ongoing risks from the
crisis, which has hammered earnings of financial companies,
dried up funding for deals and dragged down U.S. house prices.
Indexes of U.S and European corporate bonds widened to
record levels above safe-haven government paper on Wednesday,
further limiting the availability of credit.
Concerns were that traders were unwinding some of their
complex structured credit trades and seeking greater protection
on others, further pressuring spreads.
BONDS FALL
Government bond prices were also under pressure with
Japanese government bond futures <2JGBv1> falling half a point
as the rise in equity markets and better-than expected Japanese
trade data weighed. []
"JGBs took a hit as the trade data was surprisingly good,
showing that exports to Europe and Asia stayed firmer than
previously thought," said Tetsuya Miura, a bond strategist at
Shinko Securities.
Currency markets were locked in trading ranges, with the
dollar giving up gains made in the wake of the strong inflation
data after the Fed's weaker assessment of the economy.
The dollar was buying 108.17 yen <JPY=>, while the euro was
at $1.4720 <EUR=>.
Worries about the weak U.S. outlook pushed the dollar to a
more than two-year low versus the yen last month.
