* Short covering still supporting Asia stocks, HSBC
* Hong Kong's Hang Seng index up 6th day
* U.S. credit card defaults on the rise
* U.S. Treasuries flat, awaiting Fed stance on bond buys
(Updates prices, adds European outlook)
By Kevin Plumberg
HONG KONG, March 17 (Reuters) - Asian stocks jumped to a
one-month high on Tuesday, with banks extending gains on hopes
the struggling global financial system is stabilising, despite
reports showing the U.S. economy is deteriorating further.
Major European stocks were expected to open slightly lower,
with dealers expected to pause after a five-day winning streak.
The dollar edged higher against the euro and the yen while
U.S. Treasuries were steady, awaiting word on whether the
Federal Reserve would buy government debt to stimulate the
economy.
Barclays Plc <BARC.L> said on Monday it has had a strong
start to the year, echoing upbeat comments in recent weeks from
Citigroup <C.N>, JPMorgan <JPM.N> and Bank of America <BAC.N>
and helping the financial sector provide one of the biggest
boosts to regional shares.
"We still can't really relax, since we won't know the full
details of this profit until quarterly results come out, and
there's still a lot of uncertainty," said Takashi Ushio, head
of the investment strategy division at Marusan Securities in
Japan.
"But they do seem to have pulled back from the worst
danger."
The rebound has squeezed some investors who bet against
equities, forcing them to buy back shares, but analysts are
divided over whether the rally can be sustained without a broad
recovery in investor confidence.
The MSCI index of Asia Pacific shares traded outside Japan
<.MIAPJ0000PUS> rose for a third day, gaining 1.75 percent to a
one-month high, with the materials, financial and consumer
staples sectors providing the most support.
Japan's Nikkei share average <> rose 3.2 percent to
its highest close since Feb 9 amid strong gains in banking
shares. On a 20-day rolling basis, the Nikkei's respectable 4
percent gain has outperformed the 0.3 percent loss on European
stocks <> and a 2.6 percent decline in U.S. shares
<.SPX>.
Australia's benchmark S&P/ASX 200 index <> rose 3.1
percent, also powered by banks. Shares of Westpac Bank <WBC.AX>
rose 3.4 percent, while Commonwealth Bank of Australia <CBA.AX>
climbed 4.7 percent.
Hong Kong's Hang Seng index <> climbed 2 percent and
was on its way to a sixth consecutive winning session. A shift
out of bets against HSBC <0005.HK> pushed the shares of
Europe's biggest bank up 5 percent.
Wall Street snapped a four-day winning streak overnight
after American Express Co <AXP.N> said its credit card default
rates soared last month, hammering home the heavy toll the
financial crisis has had on U.S. consumers. []
U.S. industrial output fell to its lowest level in almost
seven years in February, while manufacturing in New York State
slumped further this month, data on Monday showed.
[]
CENTRAL BANKS MULL BOND BUYS
U.S. Treasuries were largely steady ahead of a two-day
policy meeting of the Federal Reserve that begins on Tuesday.
[]
The yield on the benchmark 10-year note has been unable to
rise above 3 percent after four attempts in the last few
months, with investors wondering if the Fed will soon start
buying long-dated Treasuries to drag rates lower in other
markets.
The yield is currently 2.97 percent <US10YT=RR>.
Goldman Sachs economist Ed McKelvey still believes the Fed
will shy away from that option for now because the worst of the
consumer retrenchment may have passed, equity markets have
improved lately and recent comments from Fed officials have
suggested otherwise.
He said the outcome of the meeting this week will likely be
identical to the January meeting.
"While we see several reasons why Treasury purchases make
even more sense now than they did then, the FOMC appears
disinclined to take this step yet," he said in a note.
The Bank of Japan is expected to discuss whether to raise
its purchases of government debt at a two-day meeting ending on
Wednesday, but market participants were unsure if the central
bank will make such a move at this week's board meeting.
June 10-year futures fell 0.33 point to 138.58 <2JGBv1>.
The benchmark 10-year yield <JP10YTN=JBTC> was largely flat at
1.30 percent.
Outright purchases of government bonds is one of unorthodox
policy options some central banks, such as the Bank of England,
have resorted to because they have already chopped interest
rates down to nearly zero.
The euro edged up against the U.S. dollar, in sight of
five-week highs hit the previous day and girding for a clear
break above $1.3000. Positive comments from commercial banks
have improved confidence among investors and whetted their
appetite for risk, though scepticism was endemic.
"Recent rise in share prices are merely led by players'
unwinding their short-positions and the currency market is
merely reacting to the move in stocks," said a trader at a
Japanese bank.
After hitting a near three-year high on March 4, the ICE
U.S. dollar index <.DXY>, a measure of its performance against
a group of major currencies, has fallen about 3 percent.
Gold slipped 0.5 percent to $918.50 per ounce <XAU=> in the
spot market, inching lower as the equity rally gathered pace.
U.S. crude for April delivery slipped 0.4 percent to $47.16
a barrel <CLc1>. Since the beginning of the year, oil has
bounced around a range of $50 to just below $40.
(Additional reporting by Elaine Lies in TOKYO; Editing by Kim
Coghill)
