* U.S. dollar rises to 3-month high vs yen
* Uncertainty remains but calm beckons bargain hunters
* Asia Pacific ex Japan earnings prospects darken
(Repeats to more subscribers)
By Kevin Plumberg
HONG KONG, Feb 26 (Reuters) - Asian stocks edged up on
Thursday as investors bet government "stress tests" of U.S.
banks will bring the ailing industry closer to a fix, while the
dollar extended its rally against the yen.
Mounting economic damage and prolonged political
uncertainty in Japan have tarnished the yen's safe haven
reputation, sending investors back into the dollar despite
America's own economic troubles.
An upward trend in late-maturity U.S. Treasury yields, an
overnight decline in gold to around $950 an ounce and more
stable credit markets have also enticed some investors to trim
their low-risk trades and look for value in higher-risk assets
like equities.
However, the price action in Asia lacked firm conviction as
regional exports continue to slump amid the global slowdown and
corporate earnings prospects recede rapidly.
"There is just too much uncertainty out there," said Martin
Angel, dealer at Patersons Securities in Australia. "It is
basically making a lot of people retreat to the sidelines."
Japan's Nikkei share average rose 1.1 percent, with
automaker stocks like Honda Motor Co and Nissan Motor Co
benefitting as yen weakness increased their trade
competitiveness.
The MSCI index of Asia-Pacific stocks outside Japan edged
up 0.8 percent, up for a second day after hitting a three-month
low on Tuesday.
The index has been holding up better in recent weeks than
the all-country world equities index amid persistent market
turmoil. On a 30-day rolling basis, the regional index has
slipped 3.3 percent compared with the world index, which has
fallen 9.7 percent.
Earnings expectations for companies in the MSCI
Asia-Pacific ex-Japan index have tumbled 9.6 percent in the
last month, the biggest decline since the financial crisis
began more than a year ago, according to Thomson Reuters data.
Meanwhile, falling stock prices in the same period have not
kept pace with the changing outlook, causing 12-month forward
price-to-earnings ratios, a commonly used tool for measuring
valutation, to rise a bit.
Hong Kong's Hang Seng index underperformed the region,
falling 0.8 percent in quiet trade.
STRESSED OUT
U.S. stocks struggled for direction overnight, ultimately
falling late in the session after U.S. President Barack Obama
warned of stricter regulation of Wall Street, language that is
almost always interpreted in the market to mean leaner
corporate profits.
U.S. banking regulators on Wednesday launched a "stress
test" program to assess the largest banks' ability cope with
the possibility of a deeper recession in which the unemployment
rate climbs above 10 percent next year.
Though the scenario was dire, the action offered a modicum
of comfort to investors.
However, Sebastien Barbe, a strategist with Calyon in Hong
Kong, pointed out the stress tests may not end before October
and economic data were only getting worse.
"Whereas the doom and gloom is continuing to unfold in the
U.S. and Europe, a devastating shockwave has now reached Asias
exporting and manufacturing sectors. This will likely continue
to cap the markets in the short term," he said in a note.
Continued uncertainty has not stopped dealers from
unloading their yen. The dollar was up 0.4 percent to 97.76
yen, after touching a 3-month high around 97.88 yen earlier in
the morning.
The Australian dollar strengthened to a near two-month high
against the yen, at 63.69 yen
Gold was steady at $953.10 though was still vulnerable to
aggressive profit taking after soaring to an 11-month high of
$1,005.40 an ounce last week.
Government bond markets were quiet, with the yield of the
benchmark 10-year U.S. Treasury note essentially unchanged from
late New York at 2.93 percent. The yield has risen about 70
basis points since the year began.
The March 10-year Japanese government bond future inched up
0.1 point, having fallen for two straight sessions.
U.S. crude oil rose 25 cents to $42.74 a barrel after
jumping 6 percent overnight after data showed a
larger-than-expected drop in gasoline stocks. Brent crude
gained $1.79 to settle at $44.29 a barrel.
(Additional reporting by Simone Giuliani in MELBOURNE; Editing
by Kim Coghill)
