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(Adds Europe opening, JGB drop, updates prices)
By Tom Miles
HONG KONG, May 16 (Reuters) - Asian stocks rose cautiously
on Friday as the dollar steadied against the yen, oil prices
hovered below record highs and government bonds prices slipped.
Most stock markets across Asia were modestly higher, but
Tokyo slipped while Sydney surged back towards the 6,000 mark,
last glimpsed in February, as top miner BHP Billiton <BHP.AX>
jumped, propelled by speculation of Chinese interest in the
firm.
European share markets also headed higher with London's
FTSE 100 <> opening up 0.4 percent while Germany's DAX
<> and France's CAC-40 <> started 0.6 percent
higher.
Japan's Nikkei average <> retreated 0.2 percent while
MSCI's index of other Asian stock markets <.MIAPJ0000PUS> was
up 1 percent by 0603 GMT, with Sydney's benchmark <>
closing 0.8 percent higher.
China's demand for commodities such as Australian ore
pushed the Baltic Exchange's main sea freight index <.BADI> to
a record high on Thursday, boosting shippers such as Japan's
Kawasaki Kisen Kaisha Ltd <9107.T>, which gained 4 percent.
Japanese government bond prices tumbled after a regular
Bank of Japan repurchase operation proved unexpectedly popular,
forcing many traders to dump their debt in the market. That
knocked 10-year futures <2JGBv1> by as much as half a point and
driving the yield <JP10YTN=JBTC> up to a 7-month high.
U.S. Treasuries [] also dipped after a set of weak
economic data cast doubt on the building expectations for a
Federal Reserve interest rate hike later in the year.
Global stocks festered at the start of this year as worries
about the credit crisis and the state of the U.S. economy
corroded profits and rattled banks. But Wall Street's fear has
subsided and Thursday brought the CBOE Volatility Index <.VIX>
to its lowest close since October and the S&P 500 <.SPX> and
Nasdaq <> to their highest closing levels since early
January.
A rally in U.S. tech stocks offered little comfort to South
Korea's LG Display <034220.KS>, which shed 8.3 percent after a
broker warning of stagnant profitability, and other tech
stocks, which pulled back from historic highs in the previous
session.
But Seoul's main index <> still managed to edge up 0.2
percent to a 2008 peak, aided by buoyant shipbuilders.
"Stronger than expected earnings from Wall Street and
easing worries about the credit crisis are fuelling the
market's upward momentum," said Won Jong-hyuk, a market analyst
at SK Securities.
"The index could hit its historical high of 2,085 again by
the second half of this year. But we are likely to see some
volatile patches along the way," Won added.
Taiwanese stocks got an extra fillip as investors savoured
the prospect of improved ties with China after President-elect
Ma Ying-jeou takes office next week. The main TAIEX index
<> rose 0.4 percent to its highest close this year.
QUAKE FUELS OIL
Asian exporters such as Honda Motor Co <7267.T>, which rose
3 percent, have benefited from renewed confidence in the
dollar, which was trading at 104.51 yen <JPY=> by 0642 GMT,
despite the latest rash of ugly U.S. economic data.
Reports from the U.S. Federal Reserve on Thursday showed
factory activity in the mid-Atlantic region shrinking for a
sixth straight month in May and New York state's manufacturing
declining [].
The dollar inched down, however, against the euro <EUR=>
following stronger-than-expected euro area first quarter growth
data.
"The U.S. data raised concerns about growth while euro zone
data suggested the region's economy is still more solid than
the U.S.," said a senior dealer at a European bank.
"Major currencies are likely to be confined to narrow
ranges as players are still unsure of what to focus on, and
with positions largely brought back to neutral after recent
adjustments," he said.
Neither the dollar's strength nor the weak U.S. data put a
serious dent in oil prices. U.S. crude oil <CLc1> firmed 91
cents to $125.03 a barrel after a volatile Thursday, when a big
rise in U.S. natural gas inventories triggered a $5 plunge in
crude prices, followed by a $3 bounce.
Prices remained firm on Friday as Chinese demand for
heating oil and diesel following Monday's devastating
earthquake stretched supplies of refined products, with Chinese
oil firm PetroChina <0857.HK> seen buying a third more diesel
in June than in May.
"Global supply of distillates is very tight," said Tetsu
Emori, fund manager at Astmax Co Ltd in Tokyo.
Oil markets may get a fresh impetus as U.S. President
George W. Bush heads for Saudi Arabia on Friday to renew his
appeal to help tame record oil prices and try to shore up Arab
support to contain Iran's growing regional clout.
(Additional reporting by Rika Otsuka and Eric Burroughs in
TOKYO, Felicia Loo in SINGAPORE)
