* China inflation fastest in 2 yrs, supporting rate hike
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* LME copper hits record high, oil at 2-year high
* Japan's Nikkei at highest since June on technicals, yen
* China policy, G20 outcome make outlook for risk unclear
By Kevin Plumberg
HONG KONG, Nov 11 (Reuters) - Japan's Nikkei stock index
rose to its highest since June on Thursday, adding to returns
that have outstripped U.S. and European markets in November,
while a blast of Chinese economic data sent copper prices to a
record high.
European shares opened modestly higher with the
FTSEurofirst 300 <> up 0.2 percent, London's FTSE 100
<> up 0.5 percent and German's DAX <> up 0.4
percent. But U.S. stock index futures <SPc1><NDc1><DJc1> were
slightly weaker.
Chinese consumer price inflation in October quicked to its
fastest pace in two years, which is likely to sharpen
complaints from Beijing and others that the Federal Reserve's
$600 billion money printing scheme will hasten capital flows to
their economies, complicating efforts to keep price pressures
at bay.
Shares of large Chinese banks listed in Hong Kong rose on
the views that banks can take advantage of higher lending rates
while not necessarily paying more on deposits since in the near
term China has few choices but to keep raising interest rates.
"China's process of normalising monetary conditions is
going to accelerate," said Dong Tao, chief economist for
non-Japan Asia at Credit Suisse in Hong Kong.
"Inflation is higher than expected and, more importantly,
the authorities are giving up the thought that inflation is
going to peak soon, which means that they have to take a new
look at the inflation outlook and also take the so-called
quantitative easing into consideration."
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For a PDF on conflict at the G20 meet, click
http://r.reuters.com/jux34q
For more about the Chinese economic data, click
[]
For graphics on China's October economic data, click
http://link.reuters.com/qan84q
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China's complaints are being aired at a contentious Group
of 20 leaders meeting in Seoul that kicked off on Thursday. A
breakthrough on alleviating economic imbalances could herald
knee-jerk buying of risky assets and halt a U.S. dollar rally
that has lifted it to a 1-month high. []
The Nikkei rose 0.3 percent <> after closing on
Wednesday above the 38.2 percent retracement of the move down
since April to 2010 lows in September. That level is important
for traders who use historical chart patterns to make
decisions.
Shares of big exporters such as Toyota Motor Co <7203.T>
and Canon Inc <7751.T> were among the biggest lifts to the
index, with the dollar up nearly 2 yen in November.
This month, the 7.4 percent gain in the Nikkei, Asia's
second-worst performing equity index year to date, is higher
than the 3 percent rise in the U.S. S&P 500 index <.SPX> and
the roughly 2 percent increase in the FTSEurofirst 300 index
<>.
The MSCI index of Asia Pacific shares outside Japan
<.MIAPJ0000PUS> surrendered early gains to stand little changed
by late afternoon, threatening to extend a string of three down
days after South Korea <> recorded its biggest single day
of net foreign selling of shares.
BUST, CAUTION
Hong Kong's Hang Seng index was up 1.5 percent <>, with
mainland Chinese stocks listed in the territory up 2 percent
<.HSCE>.
Bank stocks were leading the charge, with some investors
hopeful for improving net interest margins, or the difference
between lending and deposit rates. Chinese banks were some of
the biggest decliners in the prior session, suggesting some
value-driven investing as well.
Credit Suisse analysts said Chinese banks and insurers will
probably benefit the most from higher interest rates and stable
growth, but runaway inflation poses explosive risks, namely
bursting bubbles in Hong Kong.
"With its economy closely linked with the overheating
Chinese economy but its monetary policy linked to the U.S.
under the dollar peg, HK is now a hotbed for asset bubbles,"
the analysts said in a note.
The Australian dollar <AUD=> was trading nearly unchanged
on the day at US$1.0038, fighting back after the country's
unemployment rate unexpectedly rose to 5.4 percent, reducing
the chances of a rate increase in February, and China's
higher-than-expected CPI.
With the fundamental outlook for Australia still
convincingly positive, the Reserve Bank of Australia may have
to raise rates again in coming months and therefore the
currency would unlikely stay down for long.
"Strong levels of participation are consistent with a
strong and healthy labour market. Unemployment remains in the
5.1-5.4 percent that has been in all year. It remains
consistent with the RBA's tightening bias," said Su-Lin Ong,
senior economist with RBC Capital Markets in Sydney.
The U.S. dollar index <=USD>, a measure of the currency's
performance against a basket of six other major currencies, was
down 0.1 percent though up 2.3 percent since the Fed announced
its new bond buying programme.
Bets against the dollar had grown significant in the run-up
to the Fed's highly anticipated quantitative easing last week,
causing dealers to trim positions with an eye on the year end.
Commodity traders took advantage of the pause on the
dollar's rally and focused on the solid retail sales and
investment numbers out of China.
Three-month copper on the London Metal Exchange <CMCU3>
rose to a record high of $8,966 a tonne. When the China's data
first started to emerge copper was flat at $8,760.
Crude for December delivery was up 0.7 percent to $88.39 a
barrel <CLc1>, the highest since October 2008.
(Editing by Robert Birsel)
