* Markets lower expectations of U.S. interest rate
increases
* Chinese shares jump 5 pct as oil refiners rally
* European stocks set to open lower
By Anshuman Daga
SINGAPORE, June 18 (Reuters) - Asian shares advanced 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 Saudi Arabia to raise crude
output.
The dollar steadied against the yen after slipping the
previous day, while Japanese government bond futures rallied,
boosted by receding expectations for aggressive interest rate
increases in the United States and Europe. []
"What the Fed actually does with rates from now on depends
more on unforecastable oil prices than the near-term direction
of the macro economy," Rob Carnell, a London-based economist at
ING said in a note.
"But whilst we would not rule out a hike, we still believe
that rates may yet trough lower before the end of this interest
rate cycle."
European stock futures indicated a lower market open, with
June futures for the Eurostoxx 50 <STXEM8>, Germany's DAX
<FDXM8> and the French CAC 40 <FCEM8> down between 0.1 and 0.2
percent.
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. []
The dollar stood at 107.88 yen <JPY=>, little changed from
late Tuesday U.S. trading, having retreated from a four-month
high of 108.59 yen hit on trading platform EBS on Monday.
"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 said in a note.
The euro edged down around 0.1 percent from late U.S. trade
to $1.5500 <EUR=>, but has rebounded from a one-month low of
$1.5303 marked on Friday.
Japan's Nikkei share average <> unofficially ended 0.7
percent higher, led by electronic equipment firms.
The MSCI index of stocks in the Asia-Pacific region outside
of Japan <.MSCIAPJ> advanced 0.5 percent but is still down 14
percent so far this year.
South Korea's KOSPI <> added 1.3 percent, and Hong
Kong's <> jumped 1.3 percent, led by further rises in oil
shares including Sinopec <0386.HK> <600028.SS>.
The Shanghai Composite Index <>, which tumbled 2.8
percent to a fresh 15-month closing low on Tuesday, climbed as
much as 5.0 percent on Wednesday afternoon on speculation the
government may allow oil companies to raise domestic fuel
prices.
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.
U.S. short-term interest rate futures on Tuesday showed
that investors had scaled back their expectations for a Fed
rate rise in August to around 50 percent, from 90 percent
earlier in the week. []
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 dipped on Wednesday, with U.S. crude futures for
July <CLc1> down 0.6 percent to $133.40 a barrel, taking
four-day losses to 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 nearly 0.5 points to 133.64 <2JGBv1>. Last week,
the lead contract fell as low as 132.05, its lowest since July
last year.
Gold <XAU=> dipped to $882.80/883.75 an ounce from
$884.20/885.40 late in New York on Tuesday.
