* Asian shares reverse early gains, rate fears hit China
* Resurgent British pound keeps pressure on the yen
* Oil rallies to a year high above $78 as US inventories
fall
By Susan Fenton
HONG KONG, Oct 16 (Reuters) - Asian shares gave up early
gains on Friday, with interest rate speculation pressuring
assets in South Korea and China, while a bounce in the British
pound continued to depress the yen and oil hit a one-year high
above $78.
European stock futures <STXEc1> were up 0.4 percent and the
euro <EUR=> hit a fresh 14-month high against the dollar at
$1.4968, while U.S. equity futures <SPc1> were 0.1 percent
higher.
The yen <JPY=>, which lost more than 1 percent in New York
trade, continued to suffer from a rebound in sterling <GBP=> as
a short-covering squeeze on Britain's currency spilled into
cross/yen pairs.
The squeeze was triggered by comments from Bank of England
policy maker Paul Fisher that he felt more confident the bank's
quantitative easing programme was working well. The pound
jumped to as high as 148.79, a three-week high, after rallying
3 percent on Thursday. []
"An increasingly positive mood on the global economy has
been supporting higher-yielding currencies. While the yen is
not one of these currencies, it had been firming, and now we
are seeing some correction," said Ayako Sera, market strategist
at Sumitomo Trust & Banking in Tokyo.
Upbeat U.S. earnings reports on Thursday from financial
giants Goldman Sachs <GS.N> and Citigroup <C.N> bolstered hopes
the U.S. economy is picking up, along with results from tech
stalwarts Google Inc <GOOG.O> and IBM <IBM.N>, which reported
earnings that exceeded already high expectations, showing
demand from both consumers and businesses was returning.
[
Asian shares were initially buoyed by the earnings news,
but succumbed to profit taking ahead of the weekend and on
growing concerns that interest rates in parts of the region
could rise sooner than expected, potentially dampening a
corporate earnings recovery.
The MSCI index of Asia Pacific stocks traded outside Japan
<.MIAPJ0000PUS> was down 0.3 percent by midafternoon, while the
Thomson Reuters index of regional shares <.TRXFLDAXPU> was off
0.2 percent.
Despite a late slide in tech stocks as traders took profits
from a recent rally, Japan's Nikkei index <.N225> managed a 0.2
percent gain as the weak yen spurred shares of exporters
including Sony Corp <6758.T>, which rose 1.9 percent.
Japan Airlines <9205.T> dove more than 11 percent on a
Kyodo news report that the cash-strapped carrier was
reconsidering plans to sell shares in its group firms.
[ID:nT343964]
Asian shares have been trading at 14-month highs this week
and some analysts say share prices have raced up too far ahead
of economic fundamentals, but opinions differ on whether they
will continue climbing, consolidate around current levels or
retreat. "There's a growing risk of profit-taking on a
sense that U.S. shares may be overpriced ...," said Nagayuki
Yamagishi, a strategist at Mitsubishi UFJ Securities in Tokyo.
"Even so, the pace of economic recovery seems to be better
than expected, as shown by strong U.S. tech earnings, and
global stock markets are trending upwards."
INTEREST RATE JITTERS
Shanghai stocks <> slid more than 1 percent as
investors were unnerved by comments from China's central bank
late on Thursday that its ultra-loose monetary policy would
have a time limit. []
Stocks in South Korea were also hit by interest rate fears
and concerns that the won's <KRW=> recent strength will
undermine exporters' sales. The main index <> fell 1
percent.
Foreigners dumped Korean treasuries after the central bank
governor told lawmakers late on Thursday that once rates start
rising, the hikes would probably be bigger than usual.
[]
Korea is expected to be the next G20 nation to raise
interest rates, following Australia's surprise rate rise last
week, as the country seeks to stave off a potential property
bubble.
Korean liquid crystal display panel maker LG Display
<034220.KS> saw its shares drop 4.2 percent despite it posting
record quarterly profits as the market worried about earnings
prospects heading into 2010.
Elsewhere in the region, energy stocks got a lift from
surging oil prices, pushing shares such as PetroChina
<0857.HK>, the world's most valuable oil and gas producer, up 1
percent.
Thailand's stock market <> bounced back 2 percent,
after shedding 5 percent on Thursday in its biggest drop in a
year on concern over the health of the 81-year-old king. The
palace said on Thursday that the king's health was improving
but he needed time-consuming physical therapy.
The shift to high-yielding currencies sent the Australian
<AUD=> and New Zealand dollars <NZD=> to fresh highs for the
year against the dollar. []
Oil <CLc1> rose for the seventh straight session, gaining
48 cents to a one-year high of $78.06 per barrel, after data
showed unexpectedly steep declines in U.S. inventories.
Oil is heading for a gain of nearly 9 percent this week,
buoyed by signs that a global economic recovery is slowly
gathering steam and by persistent weakness in the dollar.
However, as is the case in stock markets, some analysts believe
some profit-taking may be on the cards after the steep price
run-up in recent months.
Gold <XAU=> steadied around $1,050 an ounce, after falling
more than $10 the previous day, as the precious metal
consolidated from record highs hit earlier this week.
