* Oil prices rally on Gaza conflict; gold hits 11-wk high
* Asian shares gain as resource-related firms advance
* S.Korean won hits 2-mth high, risk appetite slowly
returns
* JGB 20, 30-year yields lowest since 2003
(Repeats to additional subscribers with no change to text)
(Updates with European outlook, fresh prices, new byline)
By Rafael Nam
HONG KONG, Dec 29 (Reuters) - Oil and gold prices surged on
Monday following a flare up violence in the Middle East, while
an ensuing rally in resources-related stocks helped Asian
shares gain as what will certainly remain their worst year on
record heads to a close.
The South Korean won struck a two-month peak as a slow
recovery in tolerance for risk boosted some Asian currencies,
though the sterling hit a record low against the euro and
inched closer to parity due to the different outlook for
interest rates.
European shares were set for a slightly firmer start,
boosted by energy and mining shares on the back of higher
commodity prices. []
Still, expectations for a tough 2009 are being partially
reflected by the rally in safe-haven public debt as central
banks slash interest rates. Yields for longer-dated Japanese
government bonds fell on Monday to their lowest since 2003.
Many portfolio managers remain cautious as they wait for
more clarity on just how severe the blow to companies is going
to be, and whether the prospect of massive government spending
combined with deep rate cuts will revive growth in 2009.
"Rather than seeing a rebound on value, we want to see
companies that can deliver growth in an environment that we
have got," said Steven Robinson, a fund manager with Alleron
Investment Management in Sydney.
Investors may have to contend with yet one more risk
factor, this time in the Middle East, in a year that has
featured the worst financial crisis in decades, global
recession, and the failure of big global lenders such as Lehman
Brothers.
Israeli warplanes pounded the Hamas-ruled Gaza Strip for a
third consecutive day on Monday as the Jewish state prepared to
launch a possible invasion amid the intensifying clashes
between the two sides. []
Oil prices rose as much as $2 to nearly $40 a barrel during
Asian trade on Monday as investors worried about crude
supplies, though crude pared gains later to be up 97 cents at
$38.68.
Oil markets are ending a manic year in which crude surged
to a record at close to $150 a barrel in July before crashing
down amid fears about a sharp slowdown in the global economy.
Gold prices extended last week's rally to gain more than 2
percent to an intraday high of $889.55 an ounce, its highest
since early October. Prices for bullion later fell to $883.05.
SHARES ADVANCE
Asian shares advanced led in part by resource-related
stocks such as Chinese offshore oil producer CNOOC <0883.HK>
and Japanese oil and gas developer Inpex Holdings <1605.T>.
The MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> rose 1.2 percent, recovering from earlier
losses as much as 0.4 percent.
The index is headed for a loss of more than 50 percent for
the year, making it by far the biggest yearly slide in its 20
year history.
In Japan, the Nikkei average <> ended up 0.1 percent,
helped as well by news that three non-life insurers including
Mitsui Sumitomo Insurance Group Holdings <8725.T> were in talks
to merge. []
Elsewhere, shares in Australia <> and Singapore
<.FTSTI> were the the top performers with gains of more than 1
percent.
Hong Kong <> shares were up 0.7 percent, while South
Korea <> ended flat. But the main index in India <>
lost 0.9 percent, while Shanghai <> and Taiwan <>
posted modest losses.
Some of the willingness to add risk was also reflected in
Asia's emerging currencies. The South Korean won <KRW=> surged
2.9 percent to 1,261.9/8.1 against the dollar with traders
citing government selling of the U.S. currency.
Among major currencies, sterling fell as low as 96.65 pence
<EURGBP=D4> to mark a record low against the euro, but later
trimmed some losses to stand at 96.39 pence, down 0.2 percent
from late U.S. trading on Friday.
A bleak outlook for the U.K. economy and expectations that
euro zone interest rates will remain above British rates in
coming months have recently hit the sterling.
The dollar fell broadly, especially against the Swiss
franc, which rose on safe-haven buying amid the violence in
Gaza.
The dollar declined 0.8 percent against the Swiss franc to
1.0590 francs <CHF=> and dipped 0.3 percent against the
Japanese currency to 90.52 yen <JPY=>.
Government bonds have also remained well bid in a sign that
investors are approaching 2009 with a good degree of caution.
Both the 20-year and the 30-year Japanese government bond
yields fell to their lowest since 2003, as the yield curve
flattens on the deteriorating prospects for the world's
second-largest economy and near-zero interest rates.
On Monday, the 30-year yield dropped 4 basis points to
1.755 percent <JP30YTN=JBTC>, the lowest since August 2003. The
20-year yield slipped 4 basis points to 1.715 percent
<JP20YTN=JBTC>, the lowest since October 2003.
(Additional reporting by Yoo Choonsik in SEOUL and Denny
Thomas in SYDNEY; Editing by Lincoln Feast)
