* Asia stocks up 0.8 pct, Japan dips on weak volumes
* Yen hits 7-week high then slips on stock gains
* Shanghai stocks jump 4.6 pct after regulator assurance
* Investors are in "fatigue mood" after torrid equity rally
By Eric Burroughs
HONG KONG, Sept 3 (Reuters) - Asian shares edged up on
Thursday as a surge in the volatile Shanghai market helped
underpin indexes around the region, offsetting a rocky start to
the month on worries the global economic recovery is losing
steam.
European stocks were set to struggle in early trade after a
dip on Wall Street, with futures on the Dow Jones Eurostoxx 50
<STXEc1> down 0.2 percent.
The sharp pull-back in U.S. shares on Tuesday stirred some
worries that equities may have topped out and are due for a
deeper retreat after rallying almost non-stop for six months on
the improving corporate earnings and growth outlook.
The steady drop in government bond yields over the past
month has also been taken as a worrying sign that bond market
is ahead of stocks in seeing an economic deterioration on the
horizon.
Japanese government bonds were steady and gold remained
near a three-month high reached on Wednesday, after a survey of
the U.S. private sector labour market in August showed more job
losses than expected, increasing nervousness about the official
payrolls figure at the end of the week.
The data clouded the outlook further, with investors torn
between a quicker-than-expected recovery in manufacturing
around the world and optimism in the technology sector on one
hand, and on the other evidence that U.S. consumers are still
not spending.
Another survey of the U.S. jobs market painted a brighter
picture. The Monster Worldwide survey of marked its biggest
monthly increase in four years in August. []
"It seems the market keeps on pricing more uncertainty
about the sustainability of the recovery," said Sebastien
Barbe, senior economist with Calyon in Hong Kong, in a note.
Barbe characterised investors in Asian markets as being in
a "fatigue mood," since they have been much less likely to buy
riskier assets such as equities and emerging market currencies
and bonds, even with a steady flow of relatively positive
economic data.
Japan's Nikkei share average was down 0.6 percent, led by
Honda Motor Co stock <7267.T> and other automakers as the yen's
rise prompted profit-taking in the sector.
"We're in a situation now where expectations outpaced
reality over the last two months. This is just a natural
adjustment, even though the economy is over the worst," said
Hiroichi Nishi, general manager at the equity division of Nikko
Cordial Securities in Tokyo.
Shares of Fast Retailing <9983.T> were up 4.5 percent,
limiting losses on the index, after the clothier said it wanted
to boost annual sales more than seven-fold to $54 billion by
2020 and become a global fashion powerhouse. []
The MSCI index of Asia shares traded outside Japan rose 0.8
percent <.MIAPJ0000PUS>, with strength in the Hong Kong and
Taiwan markets bolstering the index. On Wednesday the S&P 500
<.SPX> slipped 0.3 percent on a further drop in financial
shares.
The MSCI benchmark for Asia is still up 71 percent from
March 9, when investors began to bet on a robust recovery. By
contrast, the all-country world equities index <.MIWD00000PUS>
is up 48 percent since then.
Shanghai's stock market <> jumped 4.6 percent after a
top securities regulator said late on Wednesday the market was
healthy and pledged to keep it stable, driving some investors
in search of bargains after a 22 percent plunge in August.
The lift in Chinese shares was enough to raise U.S. stock
futures <SPc1> and push down U.S. Treasury futures <TYc1>.
Global investors have been keeping an eye on the domestic
Chinese market, which is largely closed to foreigners, fearing
that the sell-off could signal slowing growth. Many analysts
have warned not to read too much into the sharp swings in the
Shanghai Composite.
The index poked back above the 125-day moving average, what
Chinese investors believe is the divider between bull and bear
markets, after falling below it on Monday.
DOLLAR DIPS
The U.S. dollar fell briefly below 92 yen for the first
time since mid-July, before clawing up 0.2 percent to 92.40 yen
<JPY=> as the low-yielding Japanese currency lost ground on the
rebound in Shanghai.
The Australian dollar erased earlier losses against the yen
and was up 0.4 percent at 77.30 yen <AUDJPY=R>. The Aussie has
been a favourite among investors for most of the last six
months because of its relatively high yield and positive growth
prospects among developed currencies.
The yen has a high probability of rising further, pushing
the dollar below 90 yen, said Tohru Sasaki, chief currency
strategist with JPMorgan in Tokyo. Such gains would put further
pressure Japanese stocks.
Sasaki said the drop in U.S. Treasury yields was one factor
that could hurt the dollar against the yen.
Treasuries fell in Asia, pushing the 10-year yield
<US10YT=RR> up 3 basis points to 3.331 percent but near a
three-week low of 3.287 percent hit on Wednesday. But Japanese
government bonds were mixed, with the 10-year yield
<JP10YTN=JBTC> holding at 1.305 percent.
In commodities, U.S. crude for October delivery edged up 38
cents to $68.43 a barrel <CLc1>. Oil fell around $5 a barrel on
Monday and Tuesday on fears about energy demand in a soft
recovery ,but a weaker U.S. dollar and steep decline in
gasoline inventories supported it on Wednesday.
(Additional reporting by Kevin Plumberg in Hong Kong and
Elaine Lies in Tokyo; Editing by Kazunori Takada)
