* Banks lead gains in Asian shares
* Crude oil hovers close to three-month low
* Dollar holds near 1-month high, JGB yields near 3-month
low
By Tom Miles
HONG KONG, July 30 (Reuters) - Asian shares rallied on
Wednesday as investors joined Wall Street's optimism that the
worst news from U.S. banks might be over and took heart from a
strengthening dollar and falling oil prices.
Asian investors also saw the bright side of Merrill Lynch's
<MER.N> $5.7 billion write-down and share sale. The news had
dented Asian stocks on Tuesday, but U.S. shares rose as some
investors took the view that the Merrill news may signal a
possible turning point in the credit crisis.
The optimism was reinforced by a surprise gain in U.S.
consumer confidence and a rise in the dollar to a one-month
high against a basket of currencies on Tuesday.
"Financial shares are moving higher after U.S. banks led a
rebound in the U.S. market. On the whole, the market likes the
yen trading in the 108s (versus the dollar) and the jump in
U.S. stocks," said Junichi Misawa, executive officer at STB
Asset Management.
Japan's Nikkei average <> was up about 1.2 percent at
0300 GMT, boosted by Matsushita Electric Industrial Co
<6752.T>, which jumped 6.7 percent on a 86 percent quarterly
net profit rise, helped by strong sales of flat-screen TVs
[].
But rival Sony Corp <6758.T> slumped 3.3 percent after it
unveiled a weak quarterly profit on Tuesday and cut its
outlook. It has been hurt by its struggling mobile phone joint
venture with Sweden's Ericsson <ERICb.ST>. []
"Japanese corporate earnings will drive the market from now
on. Earnings drew a clear contrast between Sony, whose results
were a bit of a negative surprise, and Matsushita, whose
results were a positive surprise," said Misawa.
Data showed Japanese industrial output fell 2.0 percent in
June after a 2.8 percent rise in May as overseas demand for
cars and computer chips slowed. []
Stocks elsewhere in Asia, gauged by MSCI's index
<.MIAPJ0000PUS>, rose 1.3 percent, with a strong showing from
Australia's benchmark S&P/ASX 200 index <>, which rose 2.1
percent as bank stocks rebounded from this weeks sharp falls.
OIL SKIDS
The slump in oil prices gave shares an extra boost. U.S.
crude oil <CLc1> fell to $120.42 a barrel on Tuesday, its
lowest in nearly three months, and was trading at $121.77 in
early Asian trade, 42 cents down on the day.
"Oil is heading in the right direction but we'd need to see
sustained falls before we can really say it is going to reduce
stress on businesses and consumers," said Peter Vann, head of
investment research at Constellation Capital Management in
Australia.
"We'll be moving into reporting season and there'll be a
massive focus particularly on next year's earnings. There will
be a lot more uncertainty about that in the commentary."
The weakening oil price, reflecting mounting evidence that
high prices and a souring U.S. economy were cutting into
demand, bolstered the dollar, which was steady near Tuesday's
one-month high of about 108.30 yen <JPY=>.
The U.S. dollar index, which measures the dollar's
performance against a basket of six currencies, was little
changed at 73.264 <.DXY>, having hit its highest level in about
a month on Tuesday.
The U.S. currency could extend gains if more economic data
this week further assuage market concerns about the economy
falling into a recession, traders say.
Investors will closely watch the ADP national employment
survey due later in the day to help reassess forecasts for key
U.S. jobs numbers due out on Friday.
"The market has been altering excessively pessimistic views
about the U.S. economy," said Hideaki Inoue, chief manager of
forex trading at Mitsubishi UFJ Trust Bank.
"Key data this week such as the second quarter growth data
and the jobs report later in the week could encourage some
investors to shift funds back into the dollar, though it
depends on the outcome," said Inoue.
Trade in Japanese government bonds was subdued as attention
turned to the U.S. data.
The 10-year yield <JP10YTN=JBTC> was steady at 1.540
percent, near Tuesday's three-month low of 1.525 percent, with
some investors looking to buy bonds before another anticipated
fall in yields. But traders said others were biding their time
in case positive stock market sentiment pushes yields up.
(Additional reporting by Geraldine Chua in SYDNEY, Satomi
Noguchi, Chikako Mogi and Aiko Hayashi in TOKYO, Editing by
Dhara Ranasinghe)
