(Corrects MSCI index in paragraph 12)
By Tom Miles
HONG KONG, Jan 31 (Reuters) - Investors jumped back into
shares on Thursday, brushing aside worries about top U.S. bond
insurers' credit ratings that plagued markets in early trade,
while the latest U.S. interest rate cut weighed on the dollar.
Stock markets began the day spooked by speculation on
financial television network CNBC that credit rating firms
might downgrade Ambac Financial Group Inc <ABK.N> and MBIA Inc
<MBI.N>. Both fell more than 10 percent, dragging the Dow Jones
industrial average <> down 0.3 percent by Wednesday's
close.
But stocks recovered ground after MBIA Inc said
private-equity firm Warburg Pincus had made a $500 million
investment in it.
Japan's Nikkei average <> gained 1.9 percent by 0600
GMT, with shares of top bank Mitsubishi UFJ Financial Group
(MUFG) <8306.T> back in the black.
"This has helped boost the market, especially in
financials, though the main impetus is from short-covering,"
said Yutaka Miura, senior technical analyst at Shinko
Securities.
Exporters such as Toyota Motor Co <7203.T>, Hitachi
<6501.T> and Sony Corp <6758.T>, due to announce earnings later
on Thursday, helped to provide some of the lift.
"Markets in Asia fell quite a bit on Wednesday before the
Fed meeting, preceding a Wall Street fall, so we are seeing
some interest from investors buying on dips," said Kang
Mun-seok, an analyst at Korea Investment & Securities.
"But the first quarter will continue to be rocky as more
negative news from the subprime mortgage crisis will be
unearthed."
The Fed's widely-anticipated half-percentage-point rate cut
had little market impact, but expectations that U.S. rates will
fall further kept the dollar under pressure.
It hit an all-time low against the Swiss franc at 1.0814
franc <CHF=> on electronic trading platform EBS in early Asian
trade before recovering to 1.0840 franc. Against the yen
<JPY=>, it slumped towards 106 before recovering to 106.5.
A Reuters poll showed 15 out of 16 primary dealers on Wall
Street surveyed after Wednesday's rate cut expect the central
bank to trim rates again at its next meeting in March. []
MSCI's measure of Asia Pacific stocks excluding Japan
<.MIAPJ0000PUS> was up 0.5 percent at 0614 GMT.
Seoul's main index <> led the charge, rising 2.2
percent , with battered shipbuilders such as STX Pan Ocean
<028670.KS> seen as oversold and cheered by a 5 percent jump in
the Baltic Exchange's dry freight index <.BADI> on Wednesday.
Chip makers also rose on stabilising DRAM memory chip
prices.
In Australia, the benchmark S&P/ASX 200 index <>
climbed 0.6 percent after an early slip as investors bought
into talk that the world's two biggest miners, BHP Billiton Ltd
<BHP.AX> and Rio Tinto Ltd <RIO.AX>, might be able to negotiate
a friendly merger.
Taiwan <.TW> and Hong Kong <>, however, refused to join
the rebound party and were down about 0.3 percent and 0.7
percent respectively.
"The market is in a negative direction and very
news-driven," said Peter Lai, director at DBS Vickers in Hong
Kong. "Sentiment is pessimistic because of the bad weather in
mainland China and subprime problems in the U.S."
BONDS UP, OIL DOWN
Safe-haven gold <XAU=> hovered around $923 an ounce, just
shy of the record $933.10 set on Tuesday.
Japanese government bonds [] rose to track a rally in
U.S. Treasuries after the Fed's latest cut, while recent
weakness in Tokyo shares also spurred buying of safe-haven
government debt.
But an auction of two-year JGBs on Thursday produced a
slightly weaker result than expected with investors cautious of
buying the maturity on doubts whether the Bank of Japan will
cut rates.
"The JGB market continues to take its cue from stocks, but
it's mainly driven by incentives to earn quick profits from
dealings rather than investment based on a clear conviction
that the Bank of Japan will cut interest rates," said Naomi
Hasegawa, a senior fixed-income strategist at Mitsubishi UFJ
Securities.
Crude oil prices <CLc1>, which had risen past $92 a barrel
on Wednesday fell as far as $90.80 in early Asian trade but
bounced back to recover most of the lost ground at $91.45 by
0515 GMT.
(Additional reporting by Elaine Lies, Chikako Mogi, James
Topham and Aiko Hayashi in TOKYO; Kim Soyoung in SEOUL, Sonali
Paul in SYDNEY, Rita Chang in HONG KONG; Editing by Tomasz
Janowski)
