* Pullback in oil prompts some buying but sentiment wary
* Even if oil stabilises, price shock could pose threat
* 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 above $112 a
barrel on Friday and Asian stocks broke a four-day losing streak
as concerns eased that a recent surge in energy prices would
hurt demand for riskier assets and threaten broader economic
growth.
European stocks were set to open higher, according to
financial spreadbetters, while U.S. stock futures rose
0.4 percent, indicating a firmer open on Wall Street later in
the day.
Brent oil 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 pump more oil to make up for Libyan
supply disruptions. .
Japan's Nikkei average rose 0.7 percent, its first
gain in four days, while Hong Kong advanced 1.5 percent, helped
by strong earnings from insurer AIA Group and a
rebound in airlines, which are facing sharply higher fuel bills.
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.
Still, the broader market was down nearly 3 percent for the
week and analysts said a rebound in oil prices may trigger a
sell-off in the markets again.
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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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Even if oil markets stabilise, broader sentiment could
remain cautious as high fuel prices could still add to
inflationary pressures and dampen consumer demand.
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.
FIRM BIAS
Brent crude oil futures rose $1.50 to $112.86 per
barrel, while U.S. crude neared $98.
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 global growth and giving a
firm bias to 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
on Friday 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 at around
$1.3822, 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 haven in times of global turmoil, consolidated
around $1,400 an ounce after oil's rally appeared to fizzle.
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)
* For Reuters Global Investing Blog, click on
http://blogs.reuters.com/globalinvesting
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(Edited by Ramya Venugopal)
