By Tom Miles
HONG KONG, May 14 (Reuters) - Asian stocks struggled to
make gains on Wednesday as the benefits of a firm dollar were
offset by weakness in the financial sector, oil prices near
$126 a barrel and dashed expectations of more U.S. interest
rate cuts.
Officials from the U.S. Federal Reserve, which has slashed
rates as the credit crisis deepened over the past six months,
signalled a growing wariness on Tuesday of inflationary energy
costs that could halt its rate cutting [].
"There still is growth in the world economy, even if we
slow down," Dallas Fed President Richard Fisher said. "It's
difficult for me to see a supply response that will feed into
that demand to relieve all the price pressures we see on oil."
The various Fed comments, coupled with surprisingly strong
U.S. retail sales in April, supported the dollar but fuelled a
sell-off in U.S. Treasuries. Japanese government bonds followed
suit on Wednesday, with 10-year futures falling 1.83 points at
one stage to 134.28.
The dollar held above 104.70 yen <JPY=>, reassuring Asian
exporters who depend on U.S. buying power, with shares in Canon
Inc <7751.T> rising 1.7 percent. But the Nikkei average <>
was flat overall as other shares fared less well.
Banks were hurt by comments on the credit crisis from
Federal Reserve Chairman Ben Bernanke.
"Conditions in financial markets are still far from
normal," Bernanke said in a speech. "Ultimately, market
participants themselves must address the fundamental sources of
financial strains. This process is likely to take some time."
"Bernanke's comments on financial troubles hit financial
shares such as Mizuho Financial Group, which had been leading
the Tokyo market's rebound recently," said Noritsugu Hirakawa,
strategist at Okasan Securities.
Mizuho's shares <8411.T> fell 3.3 percent, while bigger
rival Mitsubishi UFJ Financial Group <8306.T> fell 4.2 percent.
INFLATION CLUES
Investors are now waiting for the U.S. consumer price index
(CPI) later on Wednesday for further clues on whether the Fed
will stop cutting rates at its next policy meeting in June.
"If retail sales have prompted market players to think the
Fed may be done cutting rates, they will be more convinced of
that if the CPI turns out to be solid," said a trader at a
Japanese bank.
Other Asian stock markets were broadly flat, with MSCI's
index of Asian shares outside Japan <.MIAPJ0000PUS> up 0.1
percent.
Among the risers were Australia's resources firms, led by
BHP Billiton <BHP.AX>, which gained as much as 5 percent.
Sydney's benchmark S&P/ASX 200 index <> was 0.7 percent
higher.
Resources firms have gained from strong oil and metal
prices, which remained firm on Wednesday despite the strength
of the dollar. Prices for zinc <MZN3> and tin <MSN3> leapt
after Monday's massive earthquake in China hit supplies.
U.S. crude oil <CLc1> clung close to its latest record, a
peak near $127 a barrel struck on Tuesday, after OPEC producer
Iran said it was studying a plan to cut output despite signs
record-high prices were hurting consumer nations.
President Mahmoud Ahmadinejad said a proposal to reduce
Iran's crude output was being reviewed by experts, the
semi-official Fars News Agency reported. []
The earthquake in China depressed Hong Kong stocks <>
but Shanghai's main index <> bounced back from a 1.8
percent fall on Tuesday. Taiwan's tech-heavy index <> rose
0.5 percent.
The tech sector gained in New York on Tuesday on news that
billionaire investor Carl Icahn was considering launching a
proxy fight for Yahoo Inc <YHOO.O>, after takeover talks
between Yahoo and Microsoft Corp <MSFT.O> were abandoned.
[]
That brought some comfort to Wall Street. The Dow Jones
industrial average <> fell 0.3 percent but Nasdaq <>
rose 0.3 percent.
(Additional reporting by Tetsushi Kajimoto in Tokyo; Editing
by Alan Raybould)
