* Solid results at U.S. bank Wells Fargo inspires gains
* Oil tumbles to $135 on surprise jump in inventories
* Stagflation lingers: US inflation at highest since Sept
'05
(Repeats to more subscribers)
By Kevin Plumberg
HONG KONG, July 17 (Reuters) - Asian stocks rallied on
Thursday, propelled by the biggest surge in U.S. bank shares in
16 years and a sharp drop in oil prices, easing the worst fears
about the global credit crisis spiralling out of control.
Wells Fargo & Co, the fifth-biggest U.S. bank, posted
quarterly results well above expectations and raised its
dividend by 10 percent, a glowing attraction at a time when
investors are looking for stable income that helped to lift the
entire sector.
Shares of high-profile Asian exporters like consumer
electronics giant Samsung Electronics <005930.KS> gained as
lower energy prices comforted investors about the outlook for
demand, while the stock of Japan's largest bank Mitsubishi UFJ
Financial Group <8306.T> jumped 4 percent on hopes for the
financial sector.
"Investors have been relieved by the earnings from Wells
Fargo. The Tokyo market's gain is likely to be led by recently
battered financials and exporters," said Masayoshi Yano, senior
market analyst at Meiwa Securities in Tokyo.
Japan's Nikkei share average <> rose 1.3 percent,
already set for the biggests daily rise in a month. Index
heavyweights such as Sony <6758.T> and Canon <7751.T> were
among the most powerful lifts, climbing more than 2 percent.
Outside of Japan, shares in the Asia-Pacific region
<.MIAPJ0000PUS> were up 1.5 percent on the day after plumbing
the lowest since March 2007 on Wednesday.
South Korea's KOSPI <> climbed 2.35 percent after on
Wednesday touching the lowest intraday level since April 2007.
Crude prices were stable around $135 a barrel <CLc1>,
having fallen 6.9 percent so far this week on the view that
demand from the United States, the top consumer nation, would
continue to decline as a result of high energy costs.
But oil is still up 41 percent so far this year,
confounding policymakers trying to bolster growth and shield
their economies from turmoil in financial markets.
High energy prices were the biggest factor in speeding up
U.S. consumer inflation to the quickest since Hurricane Katrina
struck in September 2005.
The sharp fall in oil prices have helped to push up the
U.S. dollar overnight, though some analysts believe the
longer-term direction of the currency is still lower.
Though the financial sector was jolted higher on signs of
resilience at some banks, fears that the U.S. government may
have to take over the top mortgage finance companies, Fannie
Mae <FNM.N> and Freddie Mac <FRE.N>, continue to cast a pall of
uncertainty over markets.
"Looking beyond the rally in the dollar last night, we
think the developments concerning Freddie Mac and Fannie Mae
warrant the dollar trading in a lower trading range for now,"
said Ashley Davies, currency strategist with UBS in Singapore.
The euro was at $1.5835 <EUR=>, nearly unchanged on the day
and about two cents below an all-time high hit on Tuesday.
Against the yen, the dollar was at 105.02 yen <JPY=>.
(Additional reporting by Taiga Uranaka in Tokyo)
(Editing by Kim Coghill)
