* MSCI Asia ex-Japan index biggest weekly rise since Nov
* Nikkei erases gains after hitting 2-1/2-month intraday
high
* Questions remain about sustainability of equity rally
(Updates with latest Asian prices, European open)
By Kevin Plumberg and Rafael Nam
HONG KONG, March 27 (Reuters) - Asian stocks dipped on
Friday, but still headed for their best weekly gain in four
months as hopes the global economy could not get any worse
continue to bolster riskier assets.
The MSCI index of Asia-Pacific stocks outside Japan looks
set to surge nearly 20 percent in March to mark its second best
month in its 21-year history since December 1993, though the
latest global poll by Reuters shows strategists still expect a
tough 2009. []
European shares were set to open flat to lower following a
six-session winning streak.
Investors appeared to be latching on to the view that mixed
economic data, as opposed to completely horrible, was enough
motivation to pick up stocks at low valuations and lock in
yields on heavily discounted bonds.
They also have been heartened by further clarity on rescue
efforts for U.S. banks, though whether any policy would
ultimately be successful in stimulating global demand in the
near term was anyone's guess.
U.S. crude prices took a breather on Friday, trading below
$54 a barrel <CLc1>, after climbing global equity markets and a
rosy outlook for demand from China broadly lifted raw materials
prices, particularly industrial metals.
"Asia has a lot to gain with the U.S. looking better. Now
whether the U.S. really is better is another question," said
Tim Rocks, equity strategist with Macquarie Securities in Hong
Kong.
"In China you have some evidence stimulus policies are
working, but whether that's enough and whether we take another
leg down is still unclear."
The MSCI index of Asia Pacific stocks outside Japan
<.MIAPJ0000PUS> fell 0.3 percent on Friday after earlier
hitting a 11-week high. That was still good enough for about a
9 percent gain on the week, its largest weekly rise since late
November.
That would also mark the index's third consecutive weekly
gain that had been led by the technology sector. Companies such
as LG Electronics <066570.KS> have surged on factors that have
included cost cutting, consolidation and increased market share
at the expense of global rivals.
The materials and the consumer discretionary sectors have
also done well, though telecoms and health care sectors have
lagged.
Japan's Nikkei share average <> dipped 0.1 percent on
Friday after earlier touching a 2-1/2-month high. Car makers
and exporters of technology, such as Honda Motor Co <7267.T>
and Canon Inc <7751.T> helped add support to the index.
A sanguine outlook for demand and higher metals prices
supported mining stocks, helping the Australia's benchmark
S&P/ASX 200 index <> climb 0.7 percent.
Rio Tinto <RIO.AX> outperformed, racing up 4 percent.
"We've hit the bottom, we're making our way up," said
Stuart Smith, a Bell Potter Securities private client advisor
in Australia.
ARE WE REALLY AT THE BOTTOM?
The "R" word used more frequently among fund managers and
dealers has been recovery rather than recession, especially
with the MSCI all-country world index <.MIWD00000PUS> climbing
more than 20 percent in the last three weeks.
However, the picture from the economic data is not as
clear.
A gauge of U.S. capital spending unexpectedly spiked in
February, though the number of workers continuing to collect
state unemployment benefits climbed to a record.
[]
In Japan, contracting consumer prices beckoned deflation
and deepening recession while a larger-than-expected fall in
February retail sales were more signs of gloom. []
Still, Japanese government bonds were pressured by the
Nikkei's recent gains. The 10-year JGB future <2JGBv1> was down
0.27 point.
The yield on the benchmark 10-year U.S. Treasury note
<US10YT=RR> was steady at 2.75 percent after a relief rally
overnight following an auction of new seven-year notes saw
respectable demand.
In New Zealand, government bond yields eased slightly after
a surge in the previous day prompted the central bank to deny
talk it was holding an emergency meeting over the two-week long
selloff in the debt market. The key five-year swaps rate
<NZSM6NB5Y=> eased to around 4.95 percent from 5.02 percent.
The ABF pan-Asia government bond exchange traded fund
<2821.HK> was up 1 percent.
With the fiscal year end approaching, Japanese businesses
were bringing some overseas cash home, putting upward pressure
on the yen. The dollar was down 0.3 percent to 98.38 yen
<JPY=>.
The euro <EUR=> was up 0.3 percent to $1.3565.
U.S. light crude slipped 64 cents to $53.70 a barrel on
Friday, after having touched a 2009 high in the previous
session on stronger equities, which the market hopes signal a
recovery in energy demand down the road.
