* Asian shares gain for 2nd day on resource-related firms
* Oil dips below $40 but Middle East uncertainty remains
* Nikkei <> drops 42 pct in 2008; worst year on record
* JGB 10-yr yield hits 5-year low, Treasuries up
(Updates with latest prices, European outlook, new byline)
By Rafael Nam
HONG KONG, Dec 30 (Reuters) - Asian shares advanced for a
second consecutive session on Tuesday, led again by resource
firms that could benefit from a sharp rebound in oil prices as
Israel continued its attacks on Islamic group Hamas.
Oil and gold gave up some of their recent gains, though
analysts said prices could be underpinned in the short-term by
the uncertainty in the Middle East.
Those developments are also extending a rally in safe-haven
government bonds, while hitting the U.S. dollar on worries
about oil supplies.
European shares were also set to rise, as most of the
region's bourses head into the last full-day session of 2008.
Trading was choppy ahead of the end of a year of
unprecedented milestones. Japan's Nikkei average <>
wrapped up 2008 on Tuesday, having posted its worst year on
record after the financial crisis and surging yen drove the
world's second-largest economy into recession.
Still, 2008 is also ending with some measure of optimism
that the worst may be behind, as those central banks that can
are expected to continue slashing rates, while stimulus and
spending measures could begin to revive anaemic global growth.
"2008 was the year of the serpent, everyone got bitten,"
said Paul Biddle, a fund manager with Souls Funds Management in
Australia.
"Next year has got to be better than this year. It's going
to be a tough year ... but there will be some comeback in the
market," he said.
The MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> rose 0.6 percent as of 0640 GMT following a
continued rally in resource shares such as Chinese offshore oil
producer CNOOC <0883.HK>.
The index is still down more than 50 percent for 2008, on
track for its worst year on record, although the index has
risen more than 25 percent since a five-year low hit in late
November.
Helping drive the rally has been the measures undertaken by
policy makers worldwide.
The U.S. government on Monday expanded its bailout of the
auto industry with $6 billion in support for General Motors'
<GM.N> finance arm, while a Japanese newspaper said the country
is considering a $110 billion scheme to buy bad loans and other
financial assets from banks. []
Signs are also emerging that foreign investors are coming
back to Asia. South Korea's main index <> experienced its
first month of net foreign buying in six months in December.
Still, the stream of bleak economic data continues unabated
after South Korea said industrial output in November registered
its biggest monthly percentage drop since August 1987.
South Korea's KOSPI <> pared gains following its
industrial output data, though it still ended up 0.6 percent,
while Australia's main index <> rose 0.9 percent.
Japan's Nikkei average climbed 1.3 percent to a seven-week
peak in a holiday-shortened session, but fell 42 percent in
2008.
Taiwan's main index <> jumped 3.9 percent on a media
report that some local banks may set up branches in China by
the end of 2009. Hong Kong <> shares rose 1.1 percent.
Shares in Shanghai <> and Singapore <.FTSTI> bucked
the trend with falls.
OIL STEADIES
Oil prices <CLc2> fell 58 cents to $39.44 a barrel as some
of the concerns over global demand overshadowed Middle East
crude supply fears. Crude remains more than $100 below the peak
of a little under $150 hit in July.
Israeli warplanes killed 10 Palestinians on Tuesday in
attacks targeting government buildings and other symbols of
Hamas in the fiercest air offensive in Gaza in four decades,
stirring concerns about Middle East energy supplies.
[]
Gold, traditionally a safe-haven, also pared some gains to
steady at $873.75 an ounce after having rallied as much as 24
percent in 2008.
The dollar lost more ground as the Middle East troubles
sparked buying of the Swiss franc and euro. The U.S. currency
has fallen over the past several months as the extreme aversion
to risk has relented and U.S. investors have slowed some of
their big repatriation of overseas investments.
The euro climbed 1 percent to $1.4114 <EUR=>. The dollar
also declined 0.8 percent against the Swiss franc to 1.0525
francs <CHF=>, and slipped 0.3 percent to 90.26 yen <JPY=>.
Government bonds rose as investors appear to want some
peace of mind over the New Year's holidays.
The benchmark 10-year Japanese government bond (JGB) yield
<JP10YTN=JBTC> fell 3.5 basis points to 1.165 percent after
earlier hitting a five-year low of 1.155 percent.
For the year 10-year JGB yields have fallen 33.5 basis
points, the biggest yearly drop since 2002 -- when Japan was
last mired in recession and suffering from deflation.
U.S. Treasuries also climbed. The benchmark 10-year note
<US10YT=RR> was up 13/32 in price to yield 2.069 percent, and
is likely to post the biggest annual yield drop since 1995.
(Additional reporting by Eric Burroughs in HONG KONG and
Denny Thomas in SYDNEY; Editing by Lincoln Feast)
