* Eight-day winning streak on MSCI Asia ex-Japan index
* Sovereign bond markets show signs of rejuvenation
* U.S. Treasuries under pressure, 30-year yield above 3 pct
By Kevin Plumberg
HONG KONG, Jan 7 (Reuters) - Asian stocks rose on
Wednesday, extending their recent rally into an eighth straight
day, inspired by hopes massive U.S. government spending and tax
cuts will continue to support the dollar and stimulate demand
for exports.
The string of gains was the longest since October 2007,
supported by a rebound on Wall Street and a steady improvement
in Asian investment grade credit spreads as policymakers slash
interest rates and pour capital into struggling industries to
mitigate damage from the financial crisis.
Meanwhile, the U.S. dollar was heading for a fourth day of
gains against the euro, on expectations U.S. President-elect
Barack Obama will soon unveil a package of spending and tax
cuts worth around $775 billion.
"U.S. stocks, hopes for Obama, and a reversal of the broad
dollar-selling positions made in December will support the
dollar, possibly until Obama officially takes office later this
month," said Kengo Suzuki, a currency strategist at Shinko
Securities in Tokyo.
"But the state of the U.S. economy is so miserable. That
will prompt market players sooner or later to question the
wisdom of extended dollar buying," Suzuki said.
Federal Reserve officials believed the U.S. economy could
weaken substantially further even with benchmark rates between
zero and 0.25 percent, meeting minutes showed on Tuesday,
feeding expectations of big borrowing needs at the U.S.
Treasury and weighing on long-dated government debt prices.
[]
The MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> was up 1.45 percent to the highest since early
November, on track for an eighth consecutive session of gains.
The 4.1 percent rise in the index so far this week has
exceeded the 1.5 percent increase on the all-country world
index.
Japan's Nikkei share average <> rose 2 percent, trying
to chalk up its first seven-day winning streak since one ended
in April 2006.
Shares of small lenders received a boost from a newspaper
report saying the government may inject money into regional
banks with hopes they will be more forthcoming with loans.
[]
An early rally in Hong Kong stocks fizzled and the Hang
Seng index <> dipped into negative territory, weighed by a
5.2 percent drop in shares of China Construction Bank <0939.HK>
after news Bank of America is selling a stake in the firm at a
discount. []
SIGNS OF LIFE
The U.S. dollar was broadly higher against major
currencies, approaching a one-month high against the euro and
the yen.
The euro was down 0.4 percent at $1.3473 <EUR=>, heading
back down toward Tuesday's low near $1.33.
Against the yen, the dollar edged up 0.2 percent to 93.88
yen <JPY=> after touching a high of 94.63 yen on Tuesday.
The dollar's rally has reflected yet more evidence of the
currency's chameleon-like status throughout the financial
crisis. It was shunned briefly because the United States was
the epicenter of the credit crunch, then it was prized for what
was seen as its safe-haven status.
Now the dollar has benefited from a much broader rebound in
investors' willingness to take more risks for higher returns --
essential for the proper functioning of markets.
This rebound in risk may yet have legs to run.
"The current leg up in the markets may have a bit more life
ahead of it, but a correction is likely next week, as gains
have been quite pronounced and have come rather fast," said
Dariusz Kowalczyk, chief investment strategist with SJS Markets
in Hong Kong.
"Still, for medium-term investors, equity, commodity and
credit markets continue to offer value as we believe prices
will be much higher by year end," he said in a note.
In another sign that capital markets were slowly thawing
after a horrendous 2008, the Philippines said on Wednesday it
has launched a benchmark-sized sovereign bond offer, joining
Brazil and Colombia who each sold $1 billion of 10-year bonds
on Tuesday. []
Long-maturity U.S. Treasury yields, which move in the
opposite direction of prices, climbed higher and increased the
difference with relatively stable short-end yields.
The benchmark 10-year Treasury note yield <US10YT=RR> was
at 2.48 percent, up from 2.45 percent late in New York.
The 30-year bond yield was at 3.02 percent <US30YT=RR>,
rising from 2.99 percent on Tuesday.
U.S. oil prices were steady just below $49 <CLc1>, ahead of
U.S. government inventory data later in the day expected to
show rises across the board, signaling weak demand in the
world's largest oil consumer.
Fighting between Israeli forces and Hamas reached an
uncertain state as the two studied an Egyptian proposal for a
ceasefire in the Gaza Strip on Wednesday that won immediate
backing from the United States and Europe. []
Israel's violent offensive in Gaza to protect its towns
from Hamas rocket attacks helped to lift oil prices toward $50
a barrel in the last week.
(Additional reporting by Satomi Noguchi in TOKYO; Editing by
Dhara Ranasinghe)
