* BHP dropped bid for Rio reverberates, helps metal
producers
* Bank stocks react favourably to $800 bln Fed program
* Oil steadies at $51 after falling on global recession
fears
(Repeats to more subscribers, recasts, updates prices, adds
comments, European outlook)
By Kevin Plumberg
HONG KONG, Nov 26 (Reuters) - A financial sector rally
lifted Hong Kong and South Korea stock markets on Wednesday
following an $800 billion Federal Reserve effort to bolster
U.S. lending, while the aftermath of BHP Billiton's dropped bid
for Rio Tinto gave a boost to metals shares.
Major European stock markets were expected to open as much
as 1.5 percent lower, ahead of U.S. consumer spending and
labour market data due later in the day.
Oil prices <CLc1> were steady around $51 a barrel, after
dropping nearly 7 percent on Tuesday on fears a global
recession will weigh on demand, helping to support the U.S.
dollar.
Washington has so far racked up a staggering $8.3 trillion
bill to rescue companies and keep the financial system from
collapsing. Investors have taken the growing cost in stride, on
the view governments will have to spend whatever it takes to
contain the financial crisis before it gets worse.
[]
With the year end approaching, investors were content to
make only small adjustments to their portfolios given little
evidence that widespread risk taking for higher returns had
made a comeback.
"The market is concerned that with recessions in parts of
Asia, a recovery will take longer than in the U.S. We have just
seen things really slowdown here, so I think Asian markets have
more to fall," said Dariusz Kowalczyk, chief investment
strategist with CFC Seymour in Hong Kong.
Kowalczyk said his top trade for 2009 will be to buy U.S.
equities and sell longer-dated U.S. Treasuries, anticipating an
economic recovery later in 2009 and heavy new government debt
issuance to finance the myriad rescue packages and programs.
Meantime, gains in the financial and metals sectors
supported the entire region.
The MSCI index of Asia-Pacific stocks excluding Japan
<.MIAPJ0000PUS> was up 1 percent, on track for four consecutive
sessions of gains. Still the index will likely chalk up its
seventh straight month of losses in November.
Hong Kong's Hang Seng index <> was up about 3.4
percent, helped by metal producer Chalco's <2600.HK> 9.5
percent jump as the crumbled BHP and Rio deal was seen opening
opportunities in other firms by keeping the market more
competitive.
"Chalco has nothing to do with BHP or Rio directly but the
entire metals and mining pack is higher today after the threat
of a BHP-Rio monopoly was removed," said Castor Pang,
strategist with Sun Hung Kai Financial in Hong Kong.
HSBC stock <0005.HK> jumped 4.1 percent on hopes the Fed's
array of programs will eventually unlock the vital flow of
credit in major economies.
Australia's benchmark S&P/ASX 200 index <> edged down
0.8 percent, with BHP Billiton <BHP.AX> gaining 4 percent and
Rio Tinto <RIO.AX> plummeting 32 percent.
Rio Tinto's chairman said the company would not need to
raise equity and is confident it can sell assets to pay debt, a
day after rival BHP pulled its $66 billion offer for Rio,
citing adverse conditions in metal markets and an expected
slowdown in demand as economic conditions worsen.
[]
Japan's Nikkei share average <> closed down 1.3
percent, weighed down by a mix of major exporters such as
Toyoto Motor Corp <7203.T> and defensive names like Takeda
Pharmaceutical Co Ltd <4502.T>.
M&A SHOCKWAVES
Zig-zagging share prices, frozen lending between banks and
a seismic shift in Wall Street's structure has sent shockwaves
through many merger and acquisition deals.
So far in the fourth quarter alone, withdrawn M&A deals
total $322 billion, nearly matching the value of those
completed, according to Thomson Reuters data.
Despite the rally in bank stocks, dealers in the foreign
exchange market were sceptical the Fed's latest measures would
get lending going quickly again.
Worries over the global economic downturn and credit
jitters have kept investors wary of taking risks, limiting
selling of the dollar and yen, traders said.
"There have been so many steps taken by the U.S.
authorities, leaving the impression they are doing anything in
their capacity, but not necessarily with consistency," said
Mitsuru Sahara, a senior manager at Bank of Tokyo-Mitsubishi
UFJ.
"The market reaction has become increasingly cool, as it
has become accustomed to new measures coming one after the
other without feeling that the market has hit a bottom," he
said.
The euro fell 0.8 percent to $1.2955 <EUR=>, after hitting
a three-week high of $1.3081 overnight on trading platform EBS.
The U.S. dollar slipped 0.1 percent against the yen to
95.14 yen <JPY=>.
The U.S. light crude future for January ticked up 47 cents
to $51.24 a barrel, recovering a bit after Tuesday's steep
selloff.
Still, since July when oil hit an all-time high of $147.27
a barrel, crude has been in freefall, raising concerns among
oil-producing nations as recessions in major consumers saps
energy demand.
OPEC ministers next gather in Cairo on Saturday, but that
meeting has been called a consultative session, with its next
policy-setting meeting scheduled for Dec. 17 in Algeria.
(Editing by Kim Coghill)
(Additional reporting by Chikako Mogi in TOKYO and Parvathy
Ullatil in HONG KONG)
