(Recasts with tumble in Japanese bonds, updates prices,
details)
By Tom Miles
HONG KONG, April 25 (Reuters) - Japanese government bond
prices tumbled on Friday as investors shifted their sights to
an eventual rate rise later this year in the world's second
biggest economy, rather than a rate cut.
Trade in Japanese government bond futures <2JGBv1> was
briefly halted -- the first 15-minute halt in the market's
history -- to calm hectic dealing in one of the worst sell-offs
of the past decade.
Stocks were lifted by the bond sell off and support from a
steady dollar, which held on to gains following signs on
Thursday of resilience in the U.S. labour market.
The rise in stocks was matched by a retreat in crude oil
<CLc1>, which had hit a record close to $120 a barrel on
Tuesday.
Rising inflation pressures, expectations that the Federal
Reserve's run of rate cuts may pause in April and speculation
about a rate increase by the European Central Bank have shifted
bond investors perceptions of risk.
Dwyfor Evans, strategist, State Street Global Markets, Hong
Kong, cited other factors as well.
"Better corporate earnings out of the U.S., the U.S dollar
recovery and a tentative shift back into equity, all point
towards a potential unwind of many flight-to-quality (or flight
to safety) trades. This has become evident as well in
dollar/yen price action," Evans said.
Soaring energy prices lifted Japan's core consumer prices,
which exclude volatile fresh food prices but include oil
products, by 1.2 percent in March from a year earlier, helping
feed the argument that the Bank of Japan will find it difficult
to cut rates.
"It is hard to think that the Bank of Japan's stance on
monetary policy will change just because of a rise in cost-push
inflation," said Mamoru Yamazaki, chief economist at RBS
Securities.
"But it may stir talk among market players that it may
become more difficult for the BOJ to lower interest rates... so
I think it is negative for Japanese government bonds."
The benchmark June 10-year future <2JGBv1> fell as low as
134.58 and last traded down 2.18 points at 134.87.
STOCKS RISE
Japan's Nikkei average <> rose 2.1 percent by 0435
GMT, while MSCI's index of stocks across the rest of Asia
<.MIAPJ0000PUS> was up 0.3 percent. Australia and New Zealand
were closed, observing the ANZAC Day holiday.
The Dow Jones industrial average <> finished 0.7
percent higher on Thursday, topping 12,900 for the first time
since January, while the Nasdaq Composite Index <> gained
1 percent to achieve its highest close in three months.
U.S. investors took heart from Merrill Lynch & Co <MER.N>
leaving its dividend unchanged, Credit Suisse <CSGN.VX> cutting
its exposure to risk and Travelers Cos Inc <TRV.N>, one of the
largest U.S. property insurers, raising its profit forecast.
Asia added to the cheer with Samsung Electronics
<005930.KS>, the world's top maker of memory chips used in
consumer electronics, rising 4.2 percent after reporting a 37
percent rise in quarterly profit as strong sales and margins in
flat screens and mobile phones outweighed weakness in chips.
[]
"Samsung's numbers just came out astoundingly good. Its
profits from handset and LCD divisions were very impressive,"
said Suh Do-won, an analyst at Hanwha Securities.
Crude dropped as far as to $115.44 on Friday before
recovering to $115.93, down 13 cents on the day. But spot gold
<XAU=>, which often tracks movements in oil, rose to around
$890 an ounce.
(Additional reporting by Rika Otsuka in TOKYO, Park Jung-youn
in SEOUL, Lincoln Feast in SINGAPORE; Editing by Neil Fullick)
