* Asia stocks down but drop limited, eyes on China stimulus
* Govt bond yields dip, but supply worries linger
* Aussie/yen slips from 6-mth high as carry trades trimmed
By Eric Burroughs
HONG KONG, April 15 (Reuters) - Asian stocks pulled back
from six-month highs on Wednesday but held up after the drop on
Wall Street overnight, with hopes for more Chinese stimulus
spending helping offset reports of weak first-quarter growth.
Investors were cashing in on gains after many equity
markets have jumped between 20 percent and 30 percent since
early March, with Asian markets leading the charge higher on
signs that China is helping drive a regional growth pick-up,
analysts said.
Futures on European shares were down between 1.1 percent
and 1.3 percent in early trade.
Higher-yielding currencies such as the Australian dollar
relinquished some of their hefty gains in the past month after
data showing a surprisingly big drop in U.S. retail sales last
month highlighted the bumpy road to recovery in the
recession-hit global economy.
But gains in safe-have government bonds were limited as
investors fret about the wave of coming supply to fund
government spending aimed at reviving growth, as well as signs
that Asian central banks may have finished with their
aggressive rate cuts.
Two of the top performing markets in the world so far this
year -- the Shanghai Composite index <> and the Taiwan
Weighted index <> -- held up the best with declines of
less than 1 percent.
A report on the Shanghai Securities News website said that
Chinese annual economic growth, due to be released on Thursday,
was between 6.0 percent and 6.8 percent in the January-March
quarter, what would be the lowest on quarterly records going
back to 1992. []
Speculation has been rife in the past few days that China
might announce a new package focused on boosting consumer
spending on top of the $585 billion plan targetting
infrastructure spending.
"We've been expecting the first quarter of 2009 to be the
bottom of this cycle, and it doesn't look like we will be
disappointed," said Andy Rothman, China macro strategist at
brokerage CLSA in Shanghai.
"Whether the full-year number is closer to 7 percent or to
8 percent is far less important than our firm conviction that
the Chinese economy will be very strong in the second half of
2009, and that this strength should last well into 2010,"
Rothman said.
The MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> fell 1.4 percent, led by a drop in consumer
discretionary and technology shares -- some of the biggest
gainers in the rally.
Volumes were lighter than the previous day when stocks
jumped. The increase in volumes on days of solid gains had
suggested more market players have become more confident in
putting money to work in riskier assets.
On Tuesday the U.S. S&P 500 <.SPX> shed 2 percent, and S&P
futures <SPc1> were pointing to further losses with a drop of
0.7 percent in Asia.
After the closing bell, Intel Corp <INTC.O> said the worst
was over for the battered tech sector but its shares tumbled
after it failed to give a clear revenue forecast, citing the
economic uncertainty. []
U.S. corporate earnings season has kicked into high gear
this week, stirring some caution among investors. []
Japan's Nikkei average <> fell 1.1 percent, pulling
further away from a three-month peak reached last week.
BONDS RECOVER
Japanese government bonds gained on the stock retreat and a
solid auction of 30-year paper the previous day, while South
Korean government bonds extended gains after the Korea
Securities Finance Corp joined pension funds and other
investors to take advantage of higher yields to buy.
Bond yields and swap rates have jumped in many countries on
the worries about supply and as central banks, such as South
Korea's, have chosen to keep rates on hold while eyeing signs
of economic growth improving.
Benchmark 10-year JGB yields <JP10YTN=JBTC> dipped 3 basis
points to 1.430 percent and down from a five-month high hit
last week. The benchmark five-year Korean Treasury yield
<KR5YT=KSDA> slipped 2 basis points to 4.45 percent and was
down 34 basis points from last week's high.
The yen climbed across the board as market players trimmed
carry trades -- using the low-yielding Japanese currency as a
source of funds to buy higher-yielding currencies.
A fall in volatility across asset markets has helped make
carry trades more appealing after many investors got burnt with
the strategy late last year as stock markets plunged.
Equity strategists at HSBC said in a note to clients that
what they called the volatility bubble -- highlighted by the
violent plunge in stocks and other assets last year -- may be
over.
The dollar was down 0.5 percent at 98.30 yen <JPY=>, while
the Australian dollar dropped 1.3 percent to 70.50 yen
<AUDJPY=R> after having reached a six-month high the previous
day.
Oil prices edged down 10 cents to $49.32 <CLc1> after
losing more than 1 percent on Tuesday. [] Gold edged up
$2.55 an ounce to $891.40 <XAU=>, helped in part after the
world's largest gold-backed ETF said its holdings of bullion
remained at a record high. []
(Additional reporting by Parvathy Ullatil)
(Editing by Kazunori Takada)
