(Adds European opening, updates prices, details)
By Tom Miles
HONG KONG, April 25 (Reuters) - Japanese government bonds
suffered their biggest one-day drop in nearly five years on
Friday as investors shifted their view of the outlook for
interest rates in Japan and the United States.
Japanese government bond futures <2JGBv1> ended down 1.49
points after being briefly suspended for the first time ever in
a bid to calm hectic dealing in one of the worst sell-offs in
the past decade.
"The moves in JGBs stem from a rapid change in the market's
views on the outlook for U.S. monetary policy," said Naomi
Hasegawa, senior fixed income strategist at Mitsubishi UFJ
Securities.
"The market's earlier consensus had been that the Federal
Reserve would keep lowering interest rates towards around 1
percent, but now there are expectations the Fed may cut
interest rates once more and then take a pause."
Euro zone government bonds opened lower, with June Bund
futures off 19 ticks at 113.36. Two-year yields <EU2YT=RR> rose
1.3 basis points to 3.931.
"We're lower but really JGBs are playing catch up,
inflation is a global phenomenon and is finally making itself
felt in Japan," said one European trader.
Asian 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.
Japan's Nikkei average <> rose 2.4 percent, while
MSCI's index of stocks across the rest of Asia <.MIAPJ0000PUS>
rose 0.3 percent.
Among the gainers were Japan's No.2 bank Mizuho Financial
Group <8411.T>, which jumped 7.3 percent, and third-ranked
Sumitomo Mitsui Financial Group <8316.T>, up 6.1 percent.
Financial bookmakers, or spread betters, in London expected
Britain's FTSE 100 <> index to open 6-14 points higher,
the German DAX <> up 10-20 points, and the French CAC 40
<> up 1-13 points.
CHIPS ARE UP
Seoul added to the cheer as Samsung Electronics
<005930.KS>, the world's top maker of memory chips used in
consumer electronics, rose 4.4 percent after posting a 37
percent rise in quarterly profit on strong sales and margins in
flat screens and mobile phones that offset weaker 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.
"Until very recently people were looking for reasons to
sell stocks, but now they're really looking for reasons to buy
-- anything will do," said Nagayuki Yamagishi, a strategist at
Mitsubishi UFJ Securities.
"The big thing we're seeing right now is a growing sense
that when the Fed meets next week, any rate cut they do is
likely to be the last for a while."
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.
Crude dropped as far as to $115.44 on Friday, before
recovering to $115.94, down 12 cents on the day. But gold
<XAU=>, which often tracks movements in oil, rose to $890 an
ounce as bargain hunters snapped up bullion after it fell
through $900.
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 interest rates.
"It's hard to think 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."
(Additional reporting by Rika Otsuka in TOKYO, Park Jung-youn
in SEOUL, Lincoln Feast in SINGAPORE; Editing by Ian
Geoghegan)
