* Hopes for China demand, weaker U.S. dollar lift
commodities
* Oil heads toward $71 after tight inventory data
* U.S. yield curve steeper ahead of 10-year auction
(Repeats to more subscribers)
By Kevin Plumberg
HONG KONG, June 10 (Reuters) - Commodity-related shares led
Asian stocks higher on Wednesday, snapping a two-day decline,
after metals and oil prices rallied on a decline in the U.S.
dollar and as hopes grew for stronger Chinese industrial
demand.
Investors are scouring fresh Chinese data this week for
signs that the economy remains on the road to recovery.
Expectations that the economy is picking up have helped buoy
prices of key metals like copper, which hit its highest level
since Oct 15 on Tuesday.
"Most of the moves are coming from commodities, not
surprising considering how strong commodities were last night.
Copper in particular was extremely strong. That's reflected in
the market today," said James Foulsham, head of trading at CMC
Markets in Australia.
Dealers also chipped away at the U.S. dollar as futures
markets reflected second thoughts about a possible Federal
Reserve rate hike this year, while the Australian dollar rose
further above US$0.80 after an index of consumer confidence in
the resource-rich country showed the biggest gain in 22 years.
In Asian equity markets, Australia's benchmark S&P/ASX 200
index <> was one of the biggest gainers, rising 1.7
percent.
Shares of mining giants Rio Tinto <RIO.AX> and BHP Billiton
<BHP.AX> outperformed the broader market, rising 3.2 percent
and 3.4 percent, respectively.
Japan's Nikkei share average <> climbed 1 percent,
with Mitsubishi Corp <8058.T>, Japan's largest trading house,
up 4.2 percent, on the back of higher commodity prices.
Shipping firms also rose on hopes for a recovery in the global
economy.
The Nikkei largely shrugged off data showed Japan's core
machinery orders unexpectedly fell 5.4 percent in April,
suggesting any recovery in capital expenditure is still
fragile. []
The MSCI index of Asia Pacific stocks outside Japan
<.MIAPJ0000PUS> rose 1.6 percent, with the materials sector by
far the largest riser, while the defensive utilities sector
underperformed the market.
Shanghai copper <SCFc3> rose more than 2 percent to 41,950
yuan a tonne, tracking London copper's rally in the previous
session. But the RSI, or relative strength indices, for copper
and aluminium in both London and Shanghai are now above 70, a
sign that the markets are overbought.
It is still unclear if signs of improvement in some markets
point to the return of sustained consumer demand or if
companies are merely replenishing depleted inventories. A solid
rebound in end-user demand is needed to ensure a global
recovery.
DOLLAR PAUSES
The ICE Futures U.S. dollar index <.DXY>, a measure of its
value against a basket of six other major currencies, was
largely unchanged on the day, after falling about 1.2 percent
on Tuesday.
The dollar has been propelled by speculation the Fed may
have to raise interest rates sooner than previously thought if
economic numbers such as last Friday's U.S. payrolls figure
keep surprising to the upside.
However, the December three-month eurodollar contract
<EDZ9>, a way for traders to bet on short-term interest rates,
has clawed back about half the losses endured since last
Friday, putting pressure again on the dollar.
The Australian dollar was one of the biggest movers in the
currency market, rising about 0.3 percent on the day to
US$0.8033 <AUD=>. The currency found support from the
Westpac-Melbourne Institute consumer sentiment index, which
soared 12.7 percent in June, the biggest monthly rise in 22
years.
The Australian dollar was still well off an eight-month
high of US$0.8263 hit on June 3.
Government bond investors were focused on an auction later
in the day for $19 billion in 10-year U.S. Treasury notes and
$11 billion in 30-year bonds on Thursday.
Investors were already pushing up late maturity yields,
with the benchmark 10-year yield <US10YT=RR> edging up to 3.88
percent compared with 3.86 percent late in New York on Tuesday.
After contracting sharply for the last two trading
sessions, the difference between the 10-year yield and the
2-year yield -- also called the yield curve -- widened by 9
basis points.
U.S. light crude for July delivery rose 1.1 percent to
$70.78 a barrel <CLc1> to fresh seven-month highs, having
climbed 58 percent since March 2009. The latest rise is because
of a much larger-than-expected drop in crude inventories.
"The stats are another sign that we may have reached
bottom. Relatively speaking, it seems that things are getting
better and it should be bullish from there," said Tony Nunan,
risk manager at Mitsubishi Corp in Tokyo.
