(Corrects third bullet point to show European shares expected
to open slightly lower, not higher)
* Asian shares hit 3-week high as new U.S. president
elected
* Dollar recovers after steep slide in prior session
* European shares to open slightly lower
* Oil falls on profit-taking after previous day rally
(Updates with European outlook, latest prices)
By Rafael Nam
HONG KONG, Nov 5 (Reuters) - Asian shares hit a three-week
high and the dollar extended gains as Barack Obama became the
next U.S. president, ending uncertainty about who will lead the
world's largest economy in the midst of great financial peril.
But Asian stocks pared gains and European shares were set
to open slightly lower, with analysts saying a victory for
Obama had been largely priced in after recent rises and
concerns about the health of the global economy still
paramount.
U.S. Treasuries fell as investors became bolder in taking
risk, but oil succumbed to profit-taking after signs of global
production cuts had sent crude prices up 10 percent on Tuesday.
Gold fell more than 1 percent on the firmer dollar.
The new Obama administration, which takes office in
January, will face the world's worst financial crisis since the
Great Depression, and a potentially steep slowdown in global
growth that has pounded markets from Tokyo to Frankfurt to New
York.
"The market was putting in an Obama bounce earlier today,
and we are seeing a continuation of that rally around the
world," said Peter Kenny, managing director at Knight Equity
Markets in New Jersey.
"Clearly the market was anticipating a fairly substantial
referendum on change and an Obama presidency and a different
path. The market called it and the market was right," he said.
But some also urged caution despite unprecedented measures
to rescue banks across the world, aggressive rate cuts by
central banks, and the improvements in credit markets that have
in the last week given global markets a respite from a
thrashing.
"The knee-jerk complacency rally in Asia to an Obama win is
likely creating an opportunity to sell," said Kirby Daley, a
senior strategist for Newedge Group in Hong Kong.
"The bottom line is economic fundamentals in the U.S. are
deteriorating faster than the market can keep up with. And
there is very little an Obama administration can do to shield
Asia from the effects of this downturn."
The MSCI index of Asian stocks outside Japan
<.MIAPJ0000PUS> rose for a seventh consecutive session on
Wednesday, and was up 2.5 percent gain as of 0700 GMT, after
earlier hitting the highest since Oct. 16.
The gains came after U.S. stocks on Tuesday enjoyed their
biggest election day rally ever.
Tokyo's Nikkei <> rose 4.5 percent, led by exporters
such as Honda Motor Co <7267.T> that were bolstered by a softer
yen, while energy-linked firms such as Mitsubishi Corp <8058.T>
gained on the overnight oil price rally.
Markets in Hong Kong <>, Singapore <.FTSTI> and
Shanghai <> rose more than 3 percent, while stocks in
Australia <> and South Korea <> gained over 2
percent.
But shares in Taiwan <> and India <> declined.
DOLLAR ADVANCES
In a sign that investors may be more willing to add risk,
U.S. Treasury prices fell after Obama's win. The 2-year note's
price traded down 3/32 <US2YT=RR> for a yield of 1.44 percent.
The dollar advanced following Obama's election, recovering
some of the prior day's losses that saw the currency suffer its
biggest one-day slide in 13 years as investors went searching
for higher yielding currencies.
"(Obama's win) is arguably likely to prove more positive
for foreign markets given the perception that he will be
stronger in terms of dealing with U.S. economic problems, is
seen more favourably by foreigners generally, and is less
likely to follow the policies of President Bush," Calyon said
in a report.
The dollar rose 0.8 percent against a basket of major
currencies to 85.268 <.DXY> after falling around 2.5 percent on
Tuesday for its biggest one-day drop in 13 years.
The euro slid 1.0 percent to $1.2855 <EUR=> on trading
platform EBS.
The dollar dipped 0.2 percent against the yen to 99.50 yen
<JPY=>. Traders said dollar selling by Japanese exporters and
profit-taking supported the yen.
Oil <CLc1> remained lower after the U.S. presidential
election, with crude down $1.50 to $69.05 a barrel as investors
took profits after a spike on Tuesday following signs that
Saudi Arabia and other OPEC members had made promised cuts in
crude production.
Other commodities also fell. Gold <XAU=> was trading at
$750.75 an ounce, down $11.20 from its notional New York close
on Tuesday when it had rallied around 5 percent on the back of
a dollar slide.
(Editing by Dhara Ranasinghe)
