By Louise Heavens
SINGAPORE, May 9 (Reuters) - Oil's relentless surge to a
new peak above $124 weighed on Asian shares on Friday, while a
stronger yen pressured Japanese exporters, such as Toyota
Motor.
The euro held onto its gains after bouncing back from a
two-month low against the dollar on Thursday when the head of
the European Central Bank dampened some expectations for rate
cuts by signalling that fighting inflation was his top concern.
Japanese government bonds surged as investors rushed to
lock in relatively high yields.
Crude oil's record breaking run had kept stocks on the back
foot earlier this week as investors digested the prospect of
what Goldman Sachs predicted could be a new spike to $200 a
barrel.
By 0158 GMT, crude was up 61 cents at $124.34 a barrel
<CLc1>, having hit an intraday record of $124.61 in after-hours
electronic trading late in the New York day.
Despite rising oil prices, Wall Street found support on
increased optimism that the U.S. economy, while softening, was
not altogether cracking under the strain of the subprime
crisis.
The Dow Jones industrial average <> rose 0.4 percent,
while the Nasdaq Composite Index <> added 0.5 percent. In
Europe, shares fell slightly as both the ECB and the Bank of
England kept rates on hold.
AUTO CONCERNS
Tokyo's Nikkei average <> was down 0.9 percent at the
midsession, with the world's biggest automaker Toyota <7203.T>
falling on the strong yen and after it forecast its first
annual profit decline in seven years.
"Toyota's outlook is negative news for the overall auto
industry. Investors have become wary about earnings by other
automakers," said Katsuhiko Kodama, a senior strategist at Toyo
Securities.
Shares across the rest of Asia <.MIAPJ0000PUS> fell 0.3
percent. The benchmark is down just under 8 percent so far this
year.
Seoul <> fell 1.1 percent, with refiners squeezed by
ever rising oil prices. Singapore stocks <.FTSTI> dipped 0.2
percent and Taiwan <> opened 0.4 percent lower.
But Australia <> bucked the trend to notch up a 1.2
percent gain, boosted by miners and resources companies and
banks after National Australia Bank <NAB.AX> reported upbeat
earnings.
EURO GROWTH
Despite the ECB's inflation focus, traders said the euro
could come under renewed pressure against the dollar as the
market shifts focus to selling currencies with a deteriorating
growth outlook.
"Concern about slowing euro zone growth is still making the
euro vulnerable," said a trader at a Japanese bank.
The dollar was little changed at 103.63 yen <JPY=> while
the euro was also steady at 159.71 yen <EURJPY=R>.
Japanese government bonds surged, with the benchmark
10-year yield dropping sharply from a seven-month high as
investors rushed to buy paper at higher yield levels after
putting a poor 10-year debt sale behind them.
"Investors are buying as they figured that bond yields had
limited scope for a further rise after seeing the market
hanging in there despite a weak auction," said Atsushi Ito, JGB
strategist at Morgan Stanley.
June 10-year futures climbed 0.98 points to 136.78. The
benchmark 10-year yield fell 8.5 basis points to 1.555 percent
<JP10YTN=JBTC>, well off a seven-month high of 1.680 percent
struck this week.
In the precious metals' market, gold held near a one-week
high as the euro firmed against the dollar. Spot gold <XAU=>
hit a high of $884.20 an ounce, not far from Thursday's 1-week
high of $885.25.
Platinum <XPT=> jumped to $2,034/$2,044 an ounce, its
highest level since April 23 on speculative buying.
