GLOBAL MARKETS-Oil above $118; euro climbs on ECB talk

                                
 * Oil pushed up as Gustav barrels toward Gulf of Mexico
                                
 * MSCI pan-Asia index hangs around near 2-year low
                                
 * China Mobile shares drop 3 pct, weigh on Hong Kong index
                                
 By Kevin Plumberg
                                
 HONG KONG, Aug 28 (Reuters) - Oil prices climbed for a
fourth day on Thursday on worries a storm may gather force to
become the worst threat to U.S. offshore production since 2005,
while the euro rose on tough inflation talk from the European
Central Bank.
                                
 Asian stocks were little changed, but commodity-related
shares received a boost from crude prices, which have recovered
$7 since hitting a three-month low two weeks ago to trade above
$118 a barrel.
                                
 The euro moved further away from Tuesday's six-month low
versus the dollar as ECB officials overnight doused
expectations that the next move in interest rates will be
lower. Some officials even suggested increases might be needed,
despite an economy that is shrinking and perhaps already in a
recession. [ID:nLR715001]
                                
 "I'm not so surprised to hear some of these hawkish sounds
coming from the ECB. They are facing after all inflation that
is double their target," said Jan Lambregts, head of Asia
research with Rabobank Global Financial Markets in Hong Kong.
                                
 "The big story continues to be about the euro zone and
Japan and the disappointment in relative growth. People knew
the situation in the U.S. wasn't great, but they are now having
to face a deceleration in the euro zone a lot quicker than many
had anticipated," he said.
                                
 The euro <EUR=> rose 0.5 percent against the U.S. dollar to
$1.4786, and has recovered more than two cents from a six-month
low of $1.4570 hit on Tuesday. It also gained 0.4 percent
against the yen <EURJPY=R> and sterling <EURGBP=>, as dealers
re-rated the expected differences in yield among the
currencies.
                                
 The dollar was essentially unchanged against the yen at
about 109.55 yen <JPY=>, about 1 yen from a 7-month high around
110.66 yen set two weeks ago.
                                
  The October U.S. light crude future rose 48 cents to
$118.63 a barrel <CLc1>, climbing above a trendline that
extended down from oil's all-time high of $147.27 a barrel hit
on July 11.
                                
 Tropical Storm Gustav was downgraded from a hurricane this
week but still poses a threat to 85 percent of U.S. offshore
oil production in the Gulf of Mexico, underpinning oil prices.
                                
 If Gustav hits the Gulf as a Category 3 hurricane it would
be the biggest storm to hit the region's infrastructure since
2005.
                                
 Shell Oil Co <RDSa.L>, which has the largest offshore
operations, said it may begin shutting output as early as
Thursday and expects to evacuate 1,300 workers by Saturday.
                                
 ASIA STOCKS NEAR LOWS
                                
 Asian equity markets continued to hang around two-year lows
but low trading volumes, summer holidays and mixed corporate
results combined to muddy the near-term direction.
                                
 "Investors are unlikely to come back to the market unless
they can see an end to U.S. credit concerns and the global
economic slowdown," said Katsuhiko Kodama, senior strategist at
Toyo Securities in Tokyo.
                                
 Japan's Nikkei share average <.N225> was largely unchanged
but close to a five-month low touched last Friday.
                                
 Outside of Japan, stocks in the Asia-Pacific region
<.MIAPJ0000PUS> were up 0.5 percent, but within sight of a
17-month low hit last Thursday, according to an MSCI index.
                                
 The pan-Asia index <.MIAS00000PUS> was within a point of a
two-year low hit a week ago.
                                
 Hong Kong's Hang Seng index <.HSI> slipped about 1 percent,
weighed by drop of more than 4 percent drop in China Mobile
<0941.HK> on an increasingly more competitive outlook for the
world's largest wireless operator.
                                
 Australian stocks were big gainers, with the benchmark
S&P/ASX 200 index <.AXJO> rising more than 1 percent to a
one-month high. Shares of BHP Billiton Ltd <BHP.AX>, the
world's biggest miner, rose 2.5 percent and led the index
higher.
                                
 Gold prices, which have tended to trade in the opposite
direction to the U.S. dollar for several weeks, rose 0.7
percent in the spot market <XAU=> to around $831.80 an ounce,
having recovered almost $60 since hitting a 2008 low two weeks
ago.
 (Additional reporting by Taiga Uranaka in TOKYO; Editing by
Dhara Ranasinghe)