* US Treasury yields flat ahead of record week of new
supply
* Property, financials help Hong Kong stocks outperform
* How much longer can Chinese demand for commodities last?
(Repeats item to more subscribers without changes in text)
By Kevin Plumberg
HONG KONG, June 22 (Reuters) - Asian stocks edged up on
Monday, supported by buying of defensive sectors, while the
U.S. dollar rose on caution ahead of a Federal Reserve meeting
this week when policymakers may extend programmes to keep
borrowing costs low.
Investors were also watching U.S. Treasury yields, which
remained in a rising trend, ahead of a record $104 billion in
government bond auctions this week to finance massive rescue
spending on the economy. []
Until markets gain a clearer picture of the Fed's
intentions and its views on the nascent recovery, dealers would
likely keep asset markets in narrow ranges, taking profits on
small price rises.
"The Fed needs to find a balance between not killing the
recovery through rate hike hopes, while at the same time not
over-committing on keeping rates low," Ashley Davies, currency
strategist with UBS in Singapore, said in a note.
The ICE Futures U.S. dollar index <.DXY>, a gauge of its
value against a basket of six other major currencies, rose 0.2
percent, but it remained in a narrow range carved out in the
last month.
The Australian dollar was one of the biggest movers on the
day, falling 0.8 percent against the dollar to US$0.7995 <AUD=>
and 1.1 percent against the yen to 76.68 yen <AUDJPY=R>, as
metals prices fell on concern Chinese restocking could soon
taper off.
China's imports of refined copper hit a record in May, up
from a previous record in April and 258 percent higher than a
year earlier. However, speculation spread that the pace of
demand was unsustainable, and copper for delivery in three
months on the London Metal Exchange <MCU3> fell $159 to $4,866
a tonne.
Equity markets mostly climbed slightly higher, with buying
concentrated in the telecommunications, energy and financial
sectors.
The MSCI index of Asia Pacific stocks outside Japan rose
0.3 percent <.MIAPJ0000PUS> and was still up 50 percent since a
global equity rally began on March 9.
Japan's Nikkei share average <> was hardly changed,
with strength in defensive sectors such as food and drugs
offset by losses in industrial and technology names. The index
is up 38 percent since March 9.
Hong Kong's Hang Seng index <> rose 1.8 percent, with
banks and property-related shares providing the main boost.
Chinese banks were boosted by news suggesting credit in China
remained abundant.
Centralised infrastructure projects helped generate loan
growth of 6.5 trillion yuan ($951 billion) in the first half of
this year, the Shanghai Securities News reported.
[]
A FINE BALANCE
U.S. Treasuries were trading largely unchanged, with the
benchmark 10-year yield at 3.79 percent <US10YT=RR>.
The Fed will undoubtedly have to strike a fine balance on
Wednesday.
While many analysts do not expect the Fed to increase the
$300 billion in planned purchases of Treasuries, $200 billion
in U.S. agency debt and $1.25 trillion in agency
mortgage-backed securities, they also do not think policymakers
will break new ground with regard to exiting programmes to keep
interest rates low. []
The worst of the financial crisis has likely passed, though
the direct purchases of government and mortgage-related debt
have had a somewhat limited impact, with the 30-year mortgage
rate up some 70 basis points in the last month.
Oil fell towards $69 a barrel, extending the previous
session's drop of more than 2 percent, as bearish sentiment
over gasoline markets in the United States continued to
dominate investors' concerns.
"In May, the market was pricing in that there would be a
gasoline shortage but the latest data is obviously showing that
it is not happening," said Ben Westmore, a commodities analyst
at the National Australia Bank.
"There are also high stockpiles of crude oil, so the
general market sentiment is that the balance of demand and
supply in the market hasn't improved too much."
U.S. crude for July delivery <CLc1> fell 39 cents to
$69.16, after tumbling $1.82 on Friday, posting a weekly loss
of more than 3 percent. London Brent crude fell 32 cents to
$68.87 <LCOc1>.
