GLOBAL MARKETS-Asian shares rally shows no signs of abating

                                
 * Asian shares gain 1.6 pct on U.S. bank, global econ
relief
                                
 * Safe-haven yen retreats; euro backs down ahead of ECB
                                
 * Oil steadies above $56 a barrel on broad risk revival
                                
 By Rafael Nam
                                
 HONG KONG, May 7 (Reuters) - A rally in Asian shares
continued on Thursday as encouraging signs about the health of
U.S. banks and the state of the global economy bolstered
riskier assets such as oil and hurt safe-havens such as the
yen.
                                
 Japan's Nikkei average <.N225> surged 4.5 percent after a
three-day holiday in the country, as investors sought to catch
up with gains of 8 percent so far this week by the MSCI
regional index outside Japan that has brought the gauge to its
highest since early October.
                                
 Nearly eight months after Lehman Brothers collapsed, leaked
stress test results for U.S. banks suggested they were
healthier than previously thought, even if some institutions
such as Bank of America <BAC.N> are expected to have to raise
more money than estimated. [ID:nL6118462]
                                
 That came as a big relief for global investors ahead of the
release of formal results later in the day. The improving
confidence is being reinforced by continued hopeful signs on
the world economy.
                                
 A report on Wednesday showed U.S. private sector job losses
slowed much more than expected in April, while data showed
business activity in Europe staged its biggest one-month
increase since December 2001. [ID:nL6024958]
                                
 Helping underpin the improved mood are steep cuts in
borrowing costs by central banks that have brought interest
rates to nearly zero in the United States and Japan, as well as
a host of unconventional policies adopted by some governments.
                                
 The European Central Bank is widely expected to cut
interest rates by a quarter percentage point to 1 percent later
on Thursday, though the focus is mainly on whether it will
follow other countries in adopting these alternative measures.
[ID:nL671600]
                                
 "The market now holds the view that the worst may be over,
at least for America. A very strong bull market appears to have
begun," said Fumiyuki Nakanishi, manager at SMBC Friend
Securities in Japan.
                                
 The MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> gained 1.6 percent as of 0300 GMT on Thursday,
and has now risen every day this week.
                                
 The gauge has now risen an astounding 50 percent since its
post-Lehman crisis low in mid-September as investors are
increasingly focusing on the positive signs and disregarding
other signs that show that any recovery in the global economy
or the financial system is unlikely to be swift.
                                
 South Korea, for example, on Thursday warned against
expecting the economic recovery trend to continue, saying the
upturn was still weak and citing an uncertain global economy,
but the KOSPI <.KS11> index still advanced 0.7 percent.
                                
 On the positive side, data on Thursday showed Australian
employment jumped against all expectations in April, pulling
down the jobless rate and suggesting the economy may not be
faring as badly as many believed. [ID:nSYD397829]
                                
 That sent Australian shares <.AXJO> up 1.9 percent and the
country's currency <AUD=> to seven-month highs against the U.S.
dollar on Thursday. Other stock indexes in the region,
including in Hong Kong <.HSI> and Singapore <.FTSTI> advanced
more than 1 percent each.
                                
 FAILURE NOT AN OPTION
                                
 More broadly, investors have been widely comforted by
official reassurances U.S. banks are holding up better than
expected following a test of 19 large banks, and by its pledge
that no big U.S. bank will be allowed to fail.
                                
 "None of those 19 banks are at risk for insolvency," U.S.
Treasury Secretary Tim Geithner said, according to a transcript
of a TV interview with the Charlie Rose Show. [ID:nN06300175]
                                
 That comfort is allowing investors to shift towards riskier
assets. U.S. crude futures <CLc1> steadied at $56.61 a barrel
on Thursday, after rising more than $2 in the previous session
on data showing a surprise drop in U.S. gasoline inventories.
                                
 Expectations for a stronger global economy and a series of
output cuts by the Organization of Petroleum Exporting
Countries have also played a role in bringing crude prices up
since their lows of $33 this winter.
                                
 On the other hand, the improved risk appetite is hurting
some assets seen as havens such as the Japanese yen, which
retreated on Thursday.
                                
 The U.S. dollar rose 0.4 percent to 98.74 yen <JPY=> from
late U.S. trade on Wednesday.
                                
 Among other key currencies, the euro <EUR=> was down 0.4
percent to $1.3280 <EUR=>, after touching its highest in a
month at $1.3439 on trading platform EBS on Tuesday, ahead of
the ECB meeting later in the day.
 (Additional reporting by Aiko Hayashi in TOKYO; Editing by Jan
Dahinten)