* Bank of America gets more cash, backstop from Washington
* MSCI Asia-Pacific ex-Japan weekly fall most in 2 mths
* Euro recovers after ECB rate cut but outlook uncertain
(Repeats to additional subscribers with no change to text)
(Recasts with BofA news, adds European, U.S. outlook)
By Kevin Plumberg
HONG KONG, Jan 16 (Reuters) - Asian stocks rose and
government bonds fell on Friday, after Washington said it would
support Bank of America's purchase of Merrill Lynch with cash
and a promise to share losses, removing a risk for investors.
Wall Street stock futures jumped and financial bookmakers
were expecting major European share markets were expected to
open as much as 2 percent after U.S. officials said the top
U.S. bank <BAC.N> would receive a $20 billion investment by the
government and protection against losses on bad loans on the
books of Merrill. []
The U.S. House of Representatives also unveiled a plan
worth $825 billion to support the economy and the Senate voted
to release the remaining $350 billion of the financial industry
bailout fund, comforting investors with the notion Washington
will spend whatever it takes.
Still, the MSCI index of Asia-Pacific stocks outside Japan
was set for the biggest weekly decline in two months in the
face of official warnings of more economic pain to come,
drastic cost cutting by companies and data reflective of a
global recession.
"We continue to see current levels of equities as a good
buying opportunity, in particular in the U.S. market, where
economic recovery will come first," said Dariusz Kowalczyk,
chief investment strategist with SJS Markets in Hong Kong.
"Moreover, decisive action by the government to further
stabilize the banking system through TARP funds, such as
regarding BoA announced this morning, should restore
sentiment," he said in a note.
The MSCI Asia-Pacific ex-Japan index <.MIAPJ0000PUS>
climbed 2.2 percent, but was heading for its biggest weekly
fall since the week of November 23.
The index on Thursday hit its lowest since Dec. 8.
Japan's Nikkei share average <> finished 2.6 percent
higher, with shares of large exporters giving the index a boost
thanks to the weaker yen.
Hong Kong's Hang Seng index <> underperformed the
region, rising just 0.3 percent. HSBC shares <0005.HK> were the
biggest drag on the index after Goldman Sachs cut its rating on
the stock to sell from neutral, citing expectations for 2009
losses.
FINANCIAL CRISIS STILL LURKS
Bank losses will be in focus later on Friday when Bank of
America and Citigroup Inc. <C.N> report fourth-quarter results.
The sensitivity of the market to the fate of the U.S.
banking industry showed that though the worst of the financial
crisis may have passed, the same fears that gutted global
equity markets last year, particularly in September and
October, were still raw.
Furthermore, the risk of an even more viscious global
slowdown in the near term could continue to throttle Asia's
export markets and dent sentiment.
Oil prices stabilised around $35 a barrel <CLc1> but
remained under medium-term pressure on expectations energy
demand will continue to decline because of sharply falling
global industrial output.
"We all know there will be a little bit more pain before
the market finds its way. This whole market last year has been
about confidence levels. That's been shaken and it will take
some time to recover," said Lucinda Chan, division director at
Macquarie Equities in Sydney.
With share markets in Asia rising, investors turned away
from assets, such as government bonds, deemed as safe havens.
The yield on the benchmark 10-year U.S. Treasury note
<US10YT=RR>, which moves inversely to the price, climbed to
2.28 percent from 2.21 percent late on Thursday. However, the
yield is still a whopping 170 basis points below levels since
November.
March 10-year Japanese government bond futures fell 0.32
point <2JGBv1> after on Thursday hitting the highest for a lead
contract since Sept. 16, just after the collapse of Lehman
Brothers.
In currency markets, the yen fell broadly, especially
against high-yielding currencies, following the rebound in
shares.
"The market focus at least for the next week is how solid
the stock market recovery this time is. That means the yen may
move defensively against the dollar and the euro meanwhile,"
said Etsuko Yamashita, chief economist at Sumitomo Mitsui Bank
in Tokyo.
The euro climbed 1.4 percent from late New York trade to
119.55 yen <EURJPY=R>, bouncing further from a six-week low of
116.24 yen touched the previous day.
The U.S. dollar gained 0.6 percent to 90.30 yen <JPY=>.
The New Zealand dollar rose more than 2 percent against the
yen to 49.35 yen <NZDJPY=R>, gaining ground from lows of more
than 7 years near 47 yen struck the previous day.
The euro rose 0.8 percent to $1.3230 <EUR=>, above a
five-week low of $1.3025 hit on Thursday after the European
Central Bank cut rates by a half percentage point to 2 percent,
matching a record low rate. []
U.S. crude for February delivery <CLc1> edged up 11 cents
to $35.51 a barrel, after sliding $1.88 to $35.40 on Thursday.
The contract, which expires on Tuesday, touched the lowest
since Dec. 19 overnight.
OPEC on Thursday forecast a fall of 180,000 barrels per day
in world oil demand this year, 30,000 bpd steeper than its
previous forecast. []
(Additional reporting by Miranda Maxwell in MELBOURNE and
Satomi Noguchi in TOKYO; Editing by Lincoln Feast)
