* U.S. dollar weakens as fears simmer on fiscal health
* Oil near $60 drives energy shares higher
* Government bonds fall as investors eye riskier bets
(Repeats to more subscribers, updates price levels throughout)
By Kevin Plumberg
HONG KONG, May 13 (Reuters) - The U.S. dollar fell to a
four-month low on Wednesday as optimism about a global recovery
and concerns about U.S. fiscal health reduced its safe haven
appeal, while oil prices near $60 a barrel helped energy
shares
push most Asian stock markets higher.
Major European stock indexes were expected to open as much
as 1.1 percent higher, according to financial bookmakers, with
energy and mining companies expected to benefit from higher
commodity prices.
Government bonds continued to fall out of favour because
investors were looking for higher returns elsewhere, with
10-year Japanese government bond futures hitting a six-month
low and U.S. Treasuries under pressure.
The latest bout of dollar weakness has coincided with
surging global equity markets as investors large and small
begin to put money back to work that had been locked safely
away in dollar-denominated assets.
"The decline in the U.S. dollar that we have seen over the
past few weeks coupled with rising stock markets seems
reflective of an asset allocation shift out of cash into
equities," Ashley Davies, currency strategist with UBS in
Singapore, said in a note to clients.
Davies added the asset shift could pick up speed if more
investors bail out of bonds amid worries about a flood of
upcoming supply and scepticism about government projections
about cutting budget deficits.
Adding to souring sentiment on the U.S. dollar, a
commentary in the Financial Times about the risk of the U.S.
government losing its top credit rating touched a nerve among
traders. []
The ICE Futures U.S. dollar index was down 0.4 percent
<.DXY> after earlier plumbing its lowest level since Jan 9. The
index has fallen 8.1 percent since March 9, when a global stock
market rally started.
The euro <EUR=> rose to its highest point against the
dollar in seven weeks at around $1.3722, before easing to
$1.3710, up 0.5 percent on the day.
Stronger regional currencies resulting from portfolio
inflows and the weaker dollar are putting pressure on central
banks to temper their rise to shield already battered export
sectors. The Bank of Thailand intervened to slow the rise of
the baht on Wednesday. []
RISKY ASSETS EN VOGUE
U.S. crude for June delivery rose 1.6 percent to $59.76 a
barrel <CLc1> after briefly topping $60 on Tuesday, its highest
level since November 2008.
An unexpectedly large draw down of U.S. inventories last
week, reported by the American Petroleum Institute on Tuesday,
helped buoy bullish sentiment in oil. [] []
Gains in commodity prices in the last few months have not
been as big as equity markets since they have been stymied by
high inventory levels. However, in the last week the falling
dollar and evidence of demand in China have propped them up.
Copper for three-month delivery traded in Shanghai rose 1.4
percent <SCFc3>, after the three-month copper futures on the
London Metal Exchange rose 0.9 percent overnight <MCU3>.
In equities, a brief rally in defensive sectors fizzled by
midday and sectors that benefit from positive turns in the
business cycle -- consumer discretionary, technology and energy
-- were leading by afternoon.
Signs that consumer spending incentives and government
infrastructure projects were boosting China's economy have
given added confidence to investors that a recovery is slowly
unfolding and a shift to risker assets has room to run.
Dennis Stattman, head of BlackRock's global allocation
fund, said in a note he was adding to the fund's equity
position and diversifying fixed-income holdings from only
government bonds to include convertible and corporate bonds on
early signals of a turnaround.
"We're gradually increasing exposure to what people would
consider 'risk,' in both stocks and bonds," he said.
Japan's Nikkei share average <> edged up 0.5 percent
in choppy trade, helped by a 6.3 percent rise in shares of
Nissan Motor Co <7201.T> after the carmaker forecast a
smaller-than-expected operating loss.
Hong Kong's Hang Seng index <> rose 0.7 percent with
shares of China's top offshore oil and gas producer CNOOC Ltd
<0883.HK> the biggest boost. CNOOC jumped more than 8 percent.
The energy sector was the main gainer in the MSCI index of
Asia Pacific shares traded outside Japan <.MIAPJ0000PUS>, which
rose 0.8 percent, just below a seven-month high struck on
Monday. The index has gained 45 percent since March 9.
The yield on the benchmark 10-year U.S. Treasury note rose
about 3 basis points to 3.21 percent <US10YT=RR> ahead of U.S.
retail sales data due later in the day, with dealers are not
anticipating a change to the general theme of improving
economic conditions.
(Editing by Kim Coghill)
