* MSCI Asia Pacific ex-Japan stocks index tests 10-month
high
* US dollar maintains tight inverse relationship with
stocks
* Oil sheds losses and climbs above $65
By Kevin Plumberg
HONG KONG, July 23 (Reuters) - Asian stocks edged up on
Thursday led by energy shares, and looked set to test the
previous session's 10-month high, though investors wondered if
upward momentum from corporate earnings reports justified
increasingly pricey valuations.
The U.S. dollar hovered close to a seven-week low, with
traders basically tracking equity markets as a gauge of
investor penchant for risk taking.
The four-month rally in global stock markets has put
pressure on the dollar, which acted as a haven throughout the
financial crisis.
The latest batch of U.S. corporate results have been mixed,
with solid earnings from Apple Inc <AAPL.O> and Starbucks Corp
<SBUX.O> enough to boost the Nasdaq for an 11th straight day,
while results from Morgan Stanley <MS.N> were disappointing.
"The market has had a good run ... and a number of people
have been suggesting things are getting a little bit
expensive," said Martin Angel, dealer at Patersons Securities
Ltd in Australia.
"I would not be surprised if the market did take a little
bit of a breather."
Japan's Nikkei share average <> was little changed as
strength in high-tech firms such as Kyocera Corp <6971.T>
offset weakness in domestically-oriented companies like NTT
DoCoMo Inc <9437.T>.
Since hitting a two-month low on July 13, the index has
rallied 7.4 percent.
Hong Kong's Hang Seng index was in no mood for a breather.
After a 1.3 percent dip on Wednesday, the index was up 1.75
percent <>, with property stocks and resource-related names
among the high flyers. Asia's top oil refiner, Sinopec
<0386.HK>, jumped 3.8 percent.
The MSCI index of Asia Pacific shares outside Japan
<.MIAPJ0000PUS> was up 0.5 percent, with gains in the energy
sector leading the broader market. Since July 13, the MSCI
index has climbed 12.6 percent.
Over the next month, oil companies around the world will be
reporting their quarterly results.
Oil prices shed early losses and turned higher. U.S. crude
for September delivery rose 0.5 percent to $65.71 a barrel
<CLc1>, while Brent also climbed 0.5 percent to $67.55 <LCOc1>.
The U.S. dollar was under modest pressure, with stocks
showing some resilience in Asia.
The relationship between the dollar and global equities has
been strong since March, when investors began to cut their
holdings of cash and other safe havens and increased exposure
to stocks and other relatively risky assets.
The correlation on a 120-day basis between the ICE Futures
U.S. dollar index <.DXY> and the MSCI all-country world stocks
index <.MIWD00000PUS> is at -0.93, the tightest level of the
year.
"The overall bias is toward risk-seeking, as the stock
markets have shown a strong run-up and the Fed has clearly
stated it will continue its easy policy, which was a relief for
the market," said Tsutomu Soma, a senior manager of foreign
securities at Okasan Securities in Tokyo.
The euro rose 0.2 percent to $1.4227 <EUR=>, with the
near-term upside target the June 3rd high of $1.4337.
The yen, another common haven, was sold off. The dollar
actually rose 0.5 percent to 94.05 yen <JPY=>, and the euro was
up 0.6 percent to 133.79 yen <EURJPY=>.
U.S. and Japanese government bonds crept up, despite the
rise in equities, as investors focused on bargains rather than
sensitivity to risk.
The 10-year JGB futures rose 0.14 point, after touching a
three-week low on Wednesday.
The yield on the 10-year U.S. Treasury note <US10YT=RR>
ticked down to 3.54 percent, down from 3.55 percent on
Wednesday.
(Additional reporting by Simone Giuliani in MELBOURNE and
Aiko Hayashi in TOKYO)
(Editing by Kim Coghill)
