* Asian stock markets mostly up on hopes of solid US
earnings
* Investors brush aside Japan election loss, Nikkei off
0.4%
* Dollar climbs a touch on yen, awaits earnings news
By Koh Gui Qing
SYDNEY, July 12 (Reuters) - Asian stocks rose on Monday as
investors counted on the start of the U.S. earnings season this
week to show firms were reaping strong profits and that the
world's economic recovery was not losing steam.
Investors largely shrugged off the chance that Japan, the
world's No. 2 economy, may be trapped in a policy gridlock
after the ruling government lost a key poll on Sunday. Both the
yen and Tokyo's Nikkei average <> dipped, but investors
said the election result was largely priced in and would have
only a limited impact.
The MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> rose 0.3 percent, adding on to its 4.8 percent
gain last week. That had been its best week in over seven
months.
Financial bookmakers expected European shares to be buoyant
as well, with stocks in Britain <>, Germany <> and
France <> seen rising 0.5 to 0.6 percent.
"U.S. earnings will be reasonably strong, but the key
question is can consumer demand be strong enough to keep
earnings growth sustainable?" said Mark Konyn, who oversees
about $11 billion as Asia-Pacific chief executive of RCM in
Hong Kong.
Indeed, ThomsonReuters data suggested upcoming U.S.
corporate results should have a decent showing.
Earnings on the S&P 500 are seen to have grown 27 percent
in the second quarter. That is up from previous readings in the
past three quarters, which hovered around 22 percent. []
But the outlook for U.S. consumer demand is less bright.
U.S. retail sales data out on Wednesday is expected to show
spending easing 0.2 percent in June. []
Sluggish U.S. economic activity contrasts sharply with that
in China, where trade data showed over the weekend that the
world's No. 3 economy was growing rapidly, with exports surging
44 percent in June from a ago. []
But even with China's economy charging forward, there is no
missing investor anxiety that the world economy may still be
on
shaky ground.
For the year, the MSCI Asia-Pacific ex-Japan stock index
has shed 4.7 percent, with the bulk of heavy selling done in
May during the throes of Greece's debt crisis.
In contrast, the HSBC Asia dollar bond index <ADBI=HSBC> is
up 6.2 percent for the year, indicating investors preferred
buying safe-haven assets.
Data from fund tracker EPFR showed a similar trend. Over
$11 billion of net outflows were drained from global equity
funds in the first week of July. Money market funds, which are
deemed to be safer, had the biggest inflows in 18 months.
[]
Oil was down 0.5 percent at $75.69 <CLc1>, having hit a
near two week high on Friday, while gold prices <XAU=> dipped
but still held above $1,200 an ounce.
POLICY GRIDLOCK?
In Japan, the Nikkei stock index vacillated between gains
and losses on Monday. Yet moves either way were modest,
suggesting investors were not particularly worried about the
government's latest setback.
Japan's ruling coalition government, under Prime Minister
Naoto Kan, had lost an upper house election on Sunday that
could prevent it from passing laws smoothly in future.
With Japan already saddled with one of the world's largest
public debts by proportion of its economy, many analysts had
said Sunday's loss threatens Kan's job and puts into doubt the
government's ability to urgently cut debt.
"It's political paralysis," said Gerry Curtis, a professor
at Columbia University. "Kan is not going to quit and it's
going to be very difficult to govern."
By the close, the Nikkei average was down 0.4 percent,
having risen as much as 0.5 percent during the day.
The yen eased a touch but even traders said the move was
likely to be short-lived because the market was more focused on
the impending U.S. earnings season.
The dollar rose 0.3 percent against the softer yen to 88.90
yen <JPY=> []. Japanese government bond yields, defying
expectations for a rise, edged lower. []
"The market appears to have priced in the government losing
its majority beforehand," said Atsushi Ito, a fixed-income
strategist at Morgan Stanley MUFG in Tokyo.
"But it still remains to be seen how the market digests
policy implications going forward."
Selling pressure seemed modest, especially in light of the
yen and Nikkei's recent strong performances.
The yen had rallied to seven-month highs against the dollar
on July 1, while the Nikkei had just managed its best
performance in about seven months last week.
(Reporting by Koh Gui Qing and Tokyo Newsroom; Editing by
Lincoln Feast)
