signs of better market >>asian stocks hit mu

Mon June 9, 2003 07:59 AM ET
By Richard Baum
SINGAPORE (Reuters) - Asian stocks zipped to their best levels in months Monday, ringing up six-month peaks in Tokyo, after U.S. jobs data kept alive hopes for an economic recovery in Asia's main export market.

A smaller-than-expected fall in U.S. payrolls also underpinned the dollar, following its recent fight back amid hopes the world's top economy would revive later in the year.

But Japanese government bond yields hit fresh record lows as investors saw no reason for optimism on the second-largest economy. Oil prices held near 11-week highs and gold fell.

Tokyo's Nikkei stock average rose 0.42 percent to 8,822.73, its highest close since December 11, as banks soared.

"Stocks that have lagged the recent rally have been leading the market up today," said Hiroyuki Nakai, chief strategist at Tokai Tokyo Securities.

"But it's gradually going to become difficult to push up much further," Nakai said, expressing concern that Wall Street's recent rally could end soon.

The broad MSCI Asia Pacific Free Index ex-Japan rose 0.5 percent to its best level since last July.

Taiwan gained 1.8 percent to a four-month peak, South Korea hit a five-month high after firming 1.2 percent and Singapore advanced 0.5 percent by midday to a seven-month best. Australia was closed for a holiday.

FEARS FOR WALL STREET'S RALLY

Investors in Hong Kong were less bullish, leaving the market flat at midday on worries that the recent strong run on Wall Street may cool down this week as corporate America starts the season where it warns about earnings disappointments.

"The case for a bull market is very strong and the bear market is behind us. But the stock market is overvalued, and the time for a correction is past due," said Hugh Johnson, chief investment officer at First Albany Corp in the United States.

Such caution was reflected in a mixed close on Wall Street Friday, where the Dow Jones Industrial Average rose 0.24 percent to 9,062.79 but the Nasdaq Composite Index fell 1.13 percent to 1,627.42.

That followed May jobs data that proved less dire than expected. The payrolls data showed a loss of 17,000 jobs, compared with forecasts in a Reuters poll for a loss of 39,000.

The data underpinned the dollar, which was quoted around 118.45 yen compared with Friday's late New York level of 118.71 yen. The euro was trading at $1.1692, little changed from the U.S. close at $1.1700.

U.S. light crude oil was steady at $31.30 a barrel, hovering near its highest level since mid-March on expectations that the OPEC cartel could cut its output this week. Gold eased to $362.60 an ounce from $363.50.

Japanese government bonds extended their record run, with yields on 10-year and 20-year bonds falling to all-time lows as investors doubted the country's deflation and economic woes would end soon.

The yield on the 250th 10-year JGB sank by 1.5 basis points to 0.490 percent and that on the 20-year dropped 3.5 basis points to 0.830 percent.

STOCK STRENGTH SHUNNED

Traders said the market was paying little attention to the rise in Japanese stocks.

"The Nikkei is rising because U.S. stocks are strong. But as profit-taking set in Friday (on Wall Street), people still have doubts over the fundamentals," said Xinyi Lu, chief strategist at UFJ Bank.

Still, there were plenty of bullish signs in the Japanese stock market. The TOPIX index of all first-section issues rose for a ninth straight session, marking its longest winning streak since May 1990.

Leading the market's rise were Mizuho Financial Group and other major banks. Mizuho, the world's largest bank by assets, gained 13.3 percent, while UFJ Holdings Inc, Japan's fourth-largest banking group, gained 7.8 percent.

Banks were hit hard earlier this year as the stock market's plunge to two-decade lows in April stoked fears about their weak capital.

"The megabanks, particularly Mizuho, were oversold to a degree that would have been difficult to imagine until now," said Ken Masuda, senior dealer in equities at Shinko Securities.