* Asia stocks set for best month since 1999
* Asian swap rates up as c.banks seen on pause
* Dollar slips but up for 4th straight quarter
* iTraxx AXJ index wider in Q1, well off peaks
By Eric Burroughs
HONG KONG, March 31 (Reuters) - Asian stocks edged up on
Tuesday and were set to score their biggest monthly rise in a
decade as some investors bet the most painful stretch of
corporate earnings damage may be over and bought technology
shares.
European shares opened firmer, with Britan's FTSE 100
<> gaining 1.3 percent, Germany's DAX <> up 0.7
percent and France's CAC 40 <> moving up 1 percent.
As the first quarter and Japan's financial year draws to a
close, stocks, oil prices and higher-yielding currencies gained
after a one-day battering on news that the U.S. government was
considering pushing General Motors <GM.N> into bankruptcy.
Government bonds retreated as equity markets regained their
composure, while the dollar slipped as investors favoured
riskier assets.
Asian stocks outside Japan were set to finish the first
quarter with a dip of 1.3 percent but were up 14 percent in
March, what would be the largest monthly rise since 1999.
"There has been a huge change in sentiment. Rather than
anticipating huge sell-offs in the U.S., we've been
anticipating rallies," said Peter Wright, a dealer with Burrell
Stockbroking in Sydney.
Many stock markets have thrashed in ranges near last year's
lows, with investors cautious about calling a turnaround as the
global economy remains mired in a deep recession.
The economic fallout from the financial crisis is still
taking a big toll on many economies, with data from Japan
showing unemployment rising to a three-year high as the
country's grapples with its worst recession since World War
Two.
Japan's Nikkei average <> fell 1.5 percent, with
investors shrugging off an unexpected announcement of a new
government spending package on Tuesday ahead of the Group of 20
gathering of rich and developing nations this week.
[]
The MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> rose 0.6 percent.
South Korean stocks <> rose 13.5 percent in March, the
most since 2001, while the battered won <KRW=> jumped sharply
from 11-year lows during the month as worries about the
country's foreign debt exposure waned.
The Shanghai Composite has rebounded the most in the
January-March quarter with a rise of 28 percent, making its the
best-performing big equity market so far this year after being
the hardest hit in 2008.
The tech-heavy Taiwan Weighted index <> was poised to
finish the quarter with a 15 percent gain, boosted by incoming
orders from China as part of its hefty stimulus spending.
Shares of Taiawn's Compal Electronics <2324.TW>, the
world's No. 2 contract laptop PC maker, rose 3.2 percent after
it said demand from China, the United States and Europe is
picking up and its plans to add about 30 percent more employees
by June.
"In the current downturn, tech shares like Compal whose
sales and profits could still keep rising, are favourable,"
said Andrew Deng, a vice president of Taiwan International
Securities Corp in Taipei.
Reserve Bank of Australia Deputy Governor Ric Battellino
said on Tuesday that there are signs that China's $585 billion
in spending to buttress the economy is starting to work.
In credit markets, the iTraxx Asia ex-Japan index of
investment-grade credit derivatives <ITAIG5Y=IE> widened
slightly to 355/360 basis points, pushing out about 20 basis
points over the quarter but well off a record peaks near 650
basis points hit at the height of the financial crisis last
October.
BONDS AND DOLLAR DIP
Government bond yields and swap rates climbed further due
to the waves of expected supply tied to government stimulus
spending and as expectations grow that some Asian central banks
are done cutting interest rates.
Two-year Korean swap rates <KRQMCD2Y=KMBC> rose 5 basis
points to 3.280 percent and have jumped 56 basis points in the
past six weeks from record lows hit in February, causing the
swap curve to steepen sharply as the Bank of Korea is seen
keeping rates on hold for a while.
Ten-year Japanese government bond yields <JP10YTN=JBTC>
drifted up a basis point to 1.340 percent and held near a
six-week high.
For Japan's 2008-2009 business year ending on Tuesday, the
benchmark yield has edged up about 6 basis points as the
prospect of more supply to pay for spending has offset the
economy's sharp contraction and a likely return of deflation.
The dollar pushed up against the yen but lost ground
against most major currencies, surrendering some of its
safe-haven gains from the previous day.
The dollar climbed 1 percent to 98.20 yen <JPY=>, while the
euro edged up 0.4 percent to $1.3250 <EUR=> on the back of
sharp gains against the yen. The Australian dollar jumped 2
percent to 67.60 yen <AUDJPY=R>.
The dollar index, a gauge of its performance versus six
major currencies, slipped 0.3 percent to 85.50 <.DXY>.
For the quarter, the dollar index has risen 5.3 percent,
its fourth straight quarter of gains.
(Additional reporting by Gina Chang in Taipei; Editing by
Kazunori Takada)
