* Nikkei up 0.7 pct, other Asia shares up 0.5 pct
* Shanghai stocks outperform on oil/coal shares
* Credit gains, Indonesia CDS tightest in 11 months
* Dollar index stuck near 7-wk low, underpins commodities
By Eric Burroughs
HONG KONG, July 22 (Reuters) - Asian shares inched up to a
10-month peak on Wednesday, but gains were kept in check as
investors booked profits in the belief that the run up in
stocks had become overstretched.
European stocks were set to open higher, with futures on
the Dow Jones Eurostoxx 50 <STXEc1> up 0.4 percent.
The dollar was stuck near a seven-week low and government
bond yields edged higher as portfolio managers kept shifting
funds away from safe-haven assets, taking heart from the slew
of upbeat earnings reports showing companies starting to bounce
back from the deep global recession.
Federal Reserve Chairman Ben Bernanke also reassured
investors that the central bank was not about to tighten its
ultra-loose monetary policy anytime soon in the first of his
two days of Congressional testimony. []
But caution is setting in.
"We have had a pretty good run-up, and any attempts to
rally further would be met by profit taking," said Ben Potter,
a research analyst at IG Markets Ltd in Sydney.
Investors have tended to look past some of the negatives
from the earnings season, such as declining revenue, to focus
on the better-than-expected profits and positive outlooks due
in part to aggressive cost-cutting.
Apple <AAPL.O> was the latest firm to post surprisingly
healthy profits on strong sales of Mac computers and iPhones,
giving its stock a lift in after-hours trade that could help
the Nasdaq <> extend its longest winning streak in 12
years. []
The MSCI index of Asia-Pacific shares outside Japan
<.MIAPJ0000PUS> edged up 0.5 percent and reached its highest
level since late September.
Upward earnings revisions have helped stocks extend their
winning streak. According to data from Thomson Reuters I/B/E/S,
the one-month change in earnings estimates one-year ahead on
the MSCI APXJ is running at 1.53 percent, the highest in three
years.
Asia equity analysts at Credit Suisse said South Korea's
KOSPI was among the regional markets seeing the biggest upward
revisions to 2009 consensus earnings but said technology shares
may not have as much value now as the consumer cyclical, energy
and material sectors.
The KOSPI <> lagged with a slight rise of 0.3 percent.
Shares of LG Electronics <066570.KS> dropped and limited
the broader market's advance, with some investors cashing in on
their 75 percent surge so far this year even after the world's
No. 3 mobile phone maker blew past expectations for
second-quarter profit. []
QUICK OR GRADUAL RECOVERY?
The Shanghai Composite <> performed better than other
Asian indexes with a gain of 2.2 percent, helped by a jump in
oil and coal shares such as Sinopec <600028.SS> on hopes for
positive earnings.
Companies tied to renewable energy such as Wuhan Linuo
Solar Energy <600885.SS> jumped by the 10 percent daily limit
after Beijing announced long-awaited subsidies for
utility-scale solar power projects on Tuesday. []
Japan's Nikkei <> gained 0.7 percent, with shares of
semiconductor wafers rising on a report of higher prices.
"At this point, I think most people are expecting an
economic recovery. The issue now is just whether they think it
will happen quickly or gradually," said Tomomi Yamashita, a
fund manager at Shinkin Asset Management in Tokyo.
The boost to risky assets has made investors more
comfortable holding corporate debt, driving spreads on
benchmark credit indexes to their narrowest levels since the
collapse of Lehman Brothers last September.
Asia's benchmark iTraxx index of high-grade corporate
credit <ITAIG5Y=MP> was quoted at a mid-point of 148 basis
points by interdealer broker GFI, its tightest level since
August and well off this year's peak near 465 basis points in
March.
Indonesia was a bright spot, with its credit climbing as
investors have looked past last week's hotel bombings in
Jakarta and focused on the bright outlook for the economy and
structural reform after the election victory of President
Susilo Bambang Yudhoyono.
Jakarta's IDX Composite was flat <> but near an
11-month high struck on Tuesday, while Indonesia's credit
default swap spreads <IDGV5YUSAC=GF> were quoted at the lowest
levels in 11 months.
In currencies, the dollar index was little changed at 78.90
<.DXY> after extending its slide the previous day to a
seven-week low of 78.591. The euro dipped 0.1 percent to
$1.4200 <EUR=> but held near a one-month high struck on
Tuesday.
The dollar woes have underpinned a rebound in gold and
commodity prices. Gold edged up 30 cents an ounce to $948.55
<XAU=>, just below a five-week high struck last week. U.S.
crude oil dipped 40 cents a barrel to $65.21 <CLc1>.
In bonds, Treasuries surrendered some of their gains from
the previous day when Bernanke's caution on the outlook sparked
a strong rally that dragged yields down from a one-month high.
Benchmark 10-year notes shed 8/32 in price to yield 3.511
percent <US10YT=RR>, up 3 basis points from late U.S. trade.
(Additional reporting by Elaine Lies in Tokyo and Sonali Paul
in Sydney; Editing by Neil Fullick)
