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(Updates prices, adds Hong Kong stock market, comments)
By Kevin Plumberg
HONG KONG, May 29 (Reuters) - Government bond prices fell
and Asian stocks jumped on Thursday, with Japanese shares set
for the biggest daily gain in a month, after a monthly gauge of
U.S. business spending rose to its highest this year.
Exporters and technology companies provided the biggest
lift to Japan's Nikkei share average <>, which rose 2.8
percent, on hopes U.S. demand for Asian goods will stay strong.
However, with oil prices remaining above $130 a barrel,
inflation fears still lurk just below the surface.
The benchmark 10-year Japanese government bond yield, which
moves in the opposite direction of the price, rose to the
highest since August. On Wednesday, the benchmark 10-year U.S.
Treasury yield rose above 4 percent, the highest since early
January, as investors demanded more of an incentive to hold
bonds, with high energy costs feeding price pressures.
"It boils down to a sense of confidence. Durable goods
orders in the U.S. showed that business investment rose so it
gives some assurance to investors," said Louis Wong, research
director with Phillip Securities in Hong Kong. "I regard recent
weakness in stock markets as a correction."
Data on Wednesday showed new orders for long-lasting U.S.
manufactured goods dipped last month, but demand excluding
transportation jumped and a measure of business investment rose
sharply. []
The strength in equity markets and weakness in bonds were
essentially a reversal of Wednesday's pullback in investors'
willingness to take risks.
By 0500 GMT, MSCI's index of Asia-Pacific stocks outside
Japan <.MIAP0000PUS> gained 1.3 percent to its highest level
since Monday.
South Korea's KOSPI <> rose 1.7 percent, set for its
biggest single-day rise in two weeks. Consumer goods
heavyweight Samsung Electronics <005930.KS> led the index
higher after Nomura upgraded its rating on the company to
"buy."
Hong Kong's Hang Seng index climbed 0.7 percent, with gains
in HSBC Holdings <0005.HK> and China Mobile <0941.HK> leading
the way.
Taiwan's tech-heavy TAIEX index <> rose 1.4 percent.
"Yesterday's selling in stock futures and buying in bond
futures was rather too extreme. Those moves seem to have calmed
down today," said Takahiko Murai, general manager of equities
at Nozomi Securities.
BALANCING GROWTH AND INFLATION
Policy makers around the world have had to shift their
focus from spurring growth to keeping inflation at bay,
especially with crude prices increasing by a third so far this
year. As a result, expectations for looser monetary policy this
year in the United States, Europe and Japan have either been
pushed back or completely erased.
Two influential Federal Reserve officials warned interest
rate increases might soon be needed to ease upward pressure on
prices even though the world's largest economy may still be on
the brink of a recession.
"Growth cannot be sustained if markets are undermined by
inflation," Dallas Fed President Richard Fisher said on
Wednesday. "Stable prices go hand in hand with achieving
sustainable economic growth."
After a solid April, global equity markets have stalled in
May because of mixed signs on economic growth in developed
countries and fears that oil prices will clamp down on consumer
spending and business investment.
However, Asian markets have proved to be the most
resilient. Asian stocks fell 0.3 percent on May, compared with
a 2.8 percent decline in Europe and a 2.1 percent drop in the
United States, according to a report from Dow Jones Indexes and
STOXX Ltd.
Oil and gas companies in the Asia-Pacific region posted the
largest gains out of all of Asia, rising 10.7 percent.
Still, some analysts cautioned that the optimism evident in
markets may not last.
"Trading volume is relatively light as investors are still
unsure about oil price trends, and as more U.S. economic data
is due later this week," said Lee Sun-yeob, market analyst at
Goodmorning Shinhan Securities.
The benchmark 10-year Japanese government bond yield
<JP10YTN=JBTC> rose 4 basis points to 1.775 percent, after
earlier rising to 1.795 percent, the highest in nearly 10
months.
U.S. Treasuries edged lower, with investors facing another
debt auction later in the day that would add more supply to the
market. A poor reception to the Treasury's auction of new
two-year notes on Wednesday kept investors cautious about a
further drop in the market before Thursday's auction of $19
billion in five-year notes.
The benchmark 10-year note fell 5/32 in price to yield
4.017 percent <US10YTN=RR>, up 2 basis points from late New
York trade on Wednesday.
The July contract for U.S. light crude oil was off 58 cents
at $130.45 a barrel <CLc1>.
The U.S. dollar inched up against the yen, in a
follow-through from Wednesday's rally on the
stronger-than-expected economic data. Against the yen, the
dollar rose 0.1 percent to 104.80 yen <JPY=>, while the euro
was relatively steady at $1.5636 <EUR=>.
(Additional reporting by Aiko Hayashi in TOKYO and Park
Jung-youn in SEOUL; Editing by Lincoln Feast)
