(Recasts, adds quotes, updates prices)
By Louise Heavens
SINGAPORE, Jan 23 (Reuters) - Asian shares rallied on
Wednesday after the Federal Reserve's biggest interest rate cut
in over two decades, but nagging fears of a U.S. recession
prompted many indexes to give up much of their early gains.
Demand for safe-haven government bonds remained strong,
pushing the two-year Japanese bond yield <JP2YTN=JBTC> below to
the Bank of Japan's overnight rate target on mounting
expectations for a rate cut later in the year.
Bonds also got underpinned by a fall in S&P 500 futures
<SPc1>, pointing to another weak session on Wall Street.
The dollar <JPY=> reversed an earlier rally to fall one yen
from the day's high.
Some said the Fed's decision -- a week before a scheduled
rate meeting -- whiffed of panic even though it halted the
global market meltdown that has knocked more than 12 percent
off MSCI's All Country World index <.MIWD00000PUS> since the
start of the year.
"It seems like the Fed may be getting a bit anxious, and
that may be making people nervous," said a senior trader for a
U.S. investment bank in Tokyo.
Concerns global economic growth was hitting a wall and
financial institutions had more subprime-related writedowns to
reveal have haunted markets since the start of the year.
In an effort to shore up confidence, the U.S. central bank
slashed its benchmark rate by three-quarters of a percentage
point to 3.5 percent on Tuesday. []
"A lot of people see that the Fed's move yesterday was too
little," said Hideaki Inoue, forex manager at Mitsubishi UFJ
Trust and Banking in Tokyo.
"But given that they cut just a week before this month's
meeting, it does show that the Fed realises things are bad."
Most stock markets were still in positive territory with
Hong Kong's Hang Seng <> up 5.3 percent. But Seoul's KOSPI
<> was up just 1 percent and the Shanghai Composite
<> was flat by 0500 GMT, cutting earlier gains.
Taiwan's TAIEX <> fell 2.5 percent, dragged down by
technology shares. U.S. technology shares fell in after hours
trade after iPod and iPhone maker, Apple <AAPL.O> tumbled 12
percent on fears the weak economy would hurt the Macintosh
maker.
Apple Inc forecast a quarterly profit far below analysts'
expectations on Tuesday and posted disappointing holiday-season
iPod shipments. []
BEAR BREATHES DOWN NECK
Wall Street's benchmark indexes still hover close to bear
market territory as the prospect of a U.S. recession looms.
The blue-chip Dow average <> ended down about 1 percent
-- way above earlier lows but still 15.5 percent from its
October closing high above 14,000. The Nasdaq <> closed
down 19.8 percent from its October 2007 closing high.
On Tuesday, the International Monetary Fund warned a
significant slowdown in 2008 world economic growth appeared
inevitable, and the restoration of financial market stability
was set to be a complex and long-drawn-out task. An IMF
spokesman, Masood Ahmed, said the Fed cut was "appropriate and
helpful.
"The volatile weakening experienced in many equity markets
during the past few days has underscored the burden that the
current financial market turmoil represents for the global
growth outlook," he said in a statement. []
Australia's benchmark shed its initial 7 percent jump and
by 0446 GMT the S&P/ASX 200 index <>, which had fallen 12
sessions in a row, was up 5.3 percent.
Miner BHP Billiton Ltd <BHP.AX> lent support with a 9
percent rally after a strong second-quarter production report.
In Tokyo, the Nikkei <> was up 1.4 percent, recovering
some of its biggest one-day loss since the Sept. 11 attacks on
the United States on Tuesday. The index is still down more than
16 percent just this month alone.
In currency markets, the euro <EUR=> climbed as much as 0.4
percent to the day's high of $1.4685 after rising 1.3 percent
on Tuesday, its biggest one-day percentage gain since early
2006.
Oil fell below $89, with U.S. crude <CLc1> down 54 cents to
$88.67 a barrel.
Gold also struggled to hold onto gains, with spot gold
prices <XAU=> at around $886 an ounce.
(Editing by Lincoln Feast and Tomasz Janowski)
