* Asia stocks recover from 5-yr low, MSCI AXJ up 3 pct
* Traders cite various rumours, short-covering
* Yen slips from 13-yr peak vs pound, Treasuries drop
(Adds European outlook, changes byline)
By Eric Burroughs
HONG KONG, Nov 21 (Reuters) - Asian stock markets rebounded
from a five-year low on Friday as a variety of rumours such as
China cutting interest rates later in the day prompted
investors to cover short positions before the weekend.
The recovery in stocks pushed the yen down from a 13-year
peak hit against the pound, knocked safe-haven government bonds
lower and helped oil prices edge up from an early slide.
Traders also cited talk that the Federal Reserve could cut
interest rates in an emergency move later in the day or global
central banks could conduct another round of joint interest
rate cuts in the face of renewed market volatility.
"Lots of rumours are flying around," said Markus Amman,
director of global FX sales at HVB in Hong Kong.
The MSCI index of Asia-Pacific stocks outside Japan climbed
3.3 percent <.MIAPJ0000PUS>, having slid 3.2 percent earlier in
the day to the lowest since October 2003.
Stock markets in Europe were expected to open more than 2
percent lower, but S&P 500 futures <SPc1> were up 22 points, or
3 percent after a sharp fall on Wall Street the previous
session.
The benchmark U.S. S&P 500 index <.SPX> fell 6.7 percent an
11-year low on Thursday, amid anxiety about the fate of
corporate titans such as General Motors <GM.N>, Ford Motor
Company <F.N> and Citigroup <C.N>.
Citigroup, not long ago the world's most valuable financial
firm, is considering selling parts of itself or a merger of
some kind, a source familiar with the matter told Reuters.
[]
Fears of a deep global economic recession have pummeled
investor confidence all week, spurring more liquidation of
assets like stocks and commodities and pushing the yield on
10-year U.S. Treasuries below 3 percent for the first time in a
half-century.
South Korea's KOSPI <> led gains with a rise of almost
6 percent, while Japan's Nikkei average <> added nearly 3
percent.
The yen slipped after hitting a 13-year high against the
pound <GBPJPY=R> and pushing back near an all-time peak struck
against the Australian dollar <AUDJPY=R> last month.
The yen tends to serve as a weather vane for risk taking
via its role in the carry trade, in which the low-yielding
Japanese currency is used as a cheap source of funds to buy
higher-yielding currencies.
The dollar was up 1.3 percent against the yen at 94.90 yen
<JPY=>, while sterling gained about 2 percent to 140.75 yen
after falling to a 13-year low of 137.67 yen in early trade.
Traders remained cautious about the outlook for markets
despite the Friday recovery.
"So called-Armageddon trades -- selling stocks, buying
government debt and buying the yen -- will carry on as long as
worries over Citigroup and the U.S. Big Three automakers
persist," said a senior FX trader at a big Japanese bank.
The MSCI All-Country World Index <.MIWD00000PUS> was up 0.7
percent after plumbing a 5-1/2-year low. It is still down some
53 percent this year.
In the bond market, the 10-year Treasury note <US10YT=RR>
dropped a full point in price to yield 3.112 percent, up from a
low of 2.990 percent hit on Thursday -- the lowest since the
1950s.
U.S. crude oil for January delivery <CLc1> edged up 31
cents to $49.74 a barrel after the December contract settled
down $4 at $49.62, the lowest settlement since mid-May 2005.
Oil has tumbled by nearly $100 from record highs in July.
