* Pullback in oil prompt some buying but sentiment
wary
* India, Korea and Taiwan worst performing markets in
Asia
* Credit spreads tighten slightly as risk aversion
fizzles
By Saikat Chatterjee
HONG KONG, Feb 25 (Reuters) - Oil hovered near $111 a barrel
on Friday on easing worries of Middle East supply disruptions,
while Asian stocks rose for the first session in five on bargain
hunting.
Brent oil prices had vaulted more than 7 percent to
almost $120 on Thursday before pulling back on rumours that
Libyan leader Muammar Gaddafi had been shot and on Saudi
Arabia's reassurances that it could counter Libyan supply
disruptions.
Japan's Nikkei average rose for the first time in
four days while Hong Kong's stocks gained, helped by strong
earnings from insurer AIA Group , a rebound in airline
shares and Wall Street's overnight bounce.
The broader Asia-ex Japan stocks was trading
more than 1 percent higher.
"Foreign investors are buying back after the Nikkei lost
some 400 points this week, but it's still early days and we need
to wait to see what happens in Libya over the weekend to be able
to say if the correction is already over or not," said Toshiyuki
Kanayama, a market analyst at Monex Inc.
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For a technical outlook on oil prices, see
For a story on AIA's earnings, see
For a story on oil prices impact
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Broader sentiment remained cautious as the still-elevated
oil could hurt government budgets given widespread fuel price
subsidies in the region apart from negative impacts on
inflation, growth and trade balances.
Since the Libyan crisis erupted, some of the worst
performing markets within Asia are India, Korea and Taiwan due
to their higher dependency on oil imports, Brown Brothers
Harriman said in a note.
FIRM BIAS
Although oil prices have come off 2-1/2 year highs, they are
still up 12 percent in the past three sessions alone, raising
concerns about a wider slowdown in growth and retaining a firm
bias in the prices of safe haven assets such as gold, U.S.
Treasuries and of late the Swiss franc.
The dollar stayed above a record low against the franc
after suffering heavy losses overnight as investors
sought safety in other currencies, fearing the unrest in Libya
could spread to other oil producers.
It has fallen nearly 4.8 percent against the franc in the
last two weeks, its worst showing since June.
Meanwhile, the euro held near three-week highs, helped by
more hawkish comments from European Central Bank officials with
ECB policymaker Axel Weber saying the only direction for
interest rates to go is up. .
Other ECB officials recently talked tough about fighting
inflation, reinforcing market view that the ECB will raise
interest rates before the U.S. Federal Reserve.
With markets continuing to focus on inflation-adjusted
returns, BNP Paribas said, the Fed is seen as least credible
central bank, the ECB as the most credible while the Bank of
England lying somewhere in between.
In credit markets, the benchmark for non-Japan Asia, the
iTraxx investment grade index saw its spreads
tighten by two bps to 109.5/111.5 after blowing out to its
widest level in nearly a month this week, traders said.
Gold, another safe-haven, consolidated around $1,400 an
ounce as safe-haven buying dried up after the rally in oil
fizzled.
U.S Treasuries consolidated overnight gains in Asia, with
ten-year yields stabilising near a three-week low.
(Editing by Ramya Venugopal; Additional reporting by Umesh
Desai, Antoni Slodkowski in TOKYO and Ian Chua in SYDNEY)
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