* Expectations of further Fed action temper weak jobs
report
* Asia ex-Japan equities up 0.6 pct at 3-month high
* IMM speculators increase bets against dollar to $15.5 bln
* US wheat prices down 4.5 pct on profit taking
By Kevin Plumberg
HONG KONG, Aug 9 (Reuters) - Asian stocks edged higher on
Monday on growing speculation the Federal Reserve will have to
buy bonds sooner rather than later to bolster the sagging
economy, which is keeping the U.S. dollar under pressure.
Major European stock futures <STXEc1> were up as much as
1.5 percent, reacting positively to a late session rally on
Wall Street on Friday that saw major indexes cut earlier
losses.
A steady flow of downbeat U.S. economic data, including
disappointingly large job losses in July, has fueled
expectations the Fed will have to take bolder action to
stimulate growth, even with interest rates already near zero.
The central bank may signal a move is coming after a
meeting on Tuesday. []
The prospect of the Fed increasing the amount of cash
floating around the financial system through purchases of U.S.
bonds has been dragging on the dollar, but potentially stronger
economic stimulus helped to buoy Asian equities on Monday.
"The market seems to be anticipating a shift in Fed policy
towards renewed quantitative easing," said Andrew Pease,
investment strategist, Asia Pacific for Russell Investments in
Sydney.
"Against this backdrop, the relative resilience of Asia is
probably a function of the better structural economic
underpinnings in Asia ex Japan and perhaps some confidence that
more aggressive QE by the Fed will eventually succeed."
The main event of the week will be the Fed's message on
monetary policy on Tuesday. In addition, Chinese economic data
this week are expected to confirm growth has plateaued for now,
though exports and imports will still probably rise at a
double-digit annual pace. []
The MSCI index of Asia Pacific ex-Japan equities rose 0.6
percent <.MIAPJ0000PUS> to its highest since May 4.
Since June, the index has advanced 12 percent, exceeding an
8 percent gain on the all-country world index <.MIWD00000PUS>
and a 5 percent rise in the U.S. S&P 500 index <.SPX>.
Strength in emerging Asian equities is all the more
striking since it has coincided with equity outperformance, a
tell-tale sign that investors are focused on the region's
relatively solid long-term growth prospects and healthier
financial systems.
Japan's Nikkei share average fell 0.7 percent <>,
however, as investors focused on the negative impact of a
stronger yen on exporters. Electronics components maker Kyocera
Corp stock <6971.T> fell 2 percent and was the biggest drag on
the index.
UPTREND IN YEN
The U.S. dollar inched up 0.1 percent to 85.50 yen <JPY=>,
but was still within striking distance of a 15-year low of
84.81, below which dealers were concerned of possible
government intervention to weaken the Japanese currency.
The yen gained around 5 percent against the dollar in the
second quarter. So far in the current quarter it is up 3
percent, with an upward trend that has been brutal for
exporters but a blessing for importers showing no signs of
ending.
"After the poor jobs data, the focus is now on whether the
Fed will further ease its monetary policy. The yen has already
risen to around 85 yen (per dollar) on expectations that the
Fed might do so," said Mitsuo Shimizu, deputy general manager
at Cosmo Securities in Tokyo.
However, short-term investors should take heed. They have
amassed a large collective bet against the U.S. currency, and
usually such a big position is vulnerable to reversals.
Speculators on the International Monetary Market in the
week ended Aug. 3 had a net short dollar position of $15.5
billion, the largest since December 2009. []
Developed government bond prices ticked higher after a
rally in U.S. Treasuries on Friday. At one point in that rally,
speculation that the Fed will buy debt to pull down market
rates knocked the U.S. 10-year yield to a 15-month low.
Ten-year Japanese government bond futures were up 0.3
points <2JGBv1>, getting closer to a 7-year high hit last week.
In the cash market, the 10-year yield fell 3.5 basis points to
1.02 percent <JP10YTN=JBTC>, moving closer to a seven-year low
of 0.995 percent touched last week.
"Depending on what the Fed does at the meeting the 10-year
yield could try for 0.95 percent. The 1 percent threshold is
seen as less of a barrier now that it has been breached once,"
said Katsutoshi Inadome, a fixed-income strategist at
Mitsubishi UFJ Morgan Stanley Securities in Tokyo.
U.S. Treasury futures were flat on the day <TYc1>.
Commodities prices got a boost from continued dollar
weakness. U.S. crude for September delivery rose 0.7 percent to
$81.26 a barrel <CLc1>, having risen 12 percent since June.
However, U.S. wheat prices fell 4.6 percent <Wc1>, adding
to a 7 percent decline on Friday.
Chicago wheat futures surged to a two-year high last week
after Russia banned exports of the grain, which also fueled
fears of a spike in food inflation, but profit taking has
cooled prices since. []
(Additional reporting by Aiko Hayashi and Shinichi Saoshiro
in TOKYO)
