* Investors focus on prospects for big US fiscal package
* Asia stocks outside Japan up for 6 straight days
* Oil jumps on Mideast violence, supply cuts
* JGBs and Treasuries fall on stock rebound
(Updates prices, adds European outlook, quotes, new byline)
By Kevin Plumberg
HONG KONG, Jan 5 (Reuters) - Asian stocks rose to a
two-month high on Monday, with expectations for a global
economic recovery later this year on the back of massive
government spending prompting investors to venture back into
riskier assets.
Regional equities have risen for six consecutive days,
bolstered by expectations that the big stimulus packages will
revive growth and banks will eventually lend to each other
again.
Major European stocks were expected to open as much as 0.4
percent higher, according to financial bookmakers, on hopes
companies will benefit from the collective efforts of central
banks and other policymakers.
Many market players are looking for a large U.S. spending
package and tax cuts to help support the world's largest
economy. U.S. President-elect Barack Obama will meet later on
Monday with senior Congressional leaders to discuss the plan,
said to be worth as much as $775 billion. []
But economic reports from just about every corner of the
world reflect sharply deteriorating conditions, particularly in
the United States. Friday's U.S. payrolls report for December
is expected to show the labour market lost 500,000 jobs,
bringing total job losses in 2008 to 2,411 -- the most since
1945.
"Risk aversion has eased in the last week and this has sent
both the Dow and the Nikkei higher," said Nagayuki Yamagishi, a
strategist at Mitsubishi UFJ Securities in Tokyo.
"There's quite a lot of expectations for the government of
Obama and the policies he's likely to enact, but when he
actually takes office this mood may evaporate and a lot of
problems still linger."
However, some analysts believe the record drops that many
stock markets suffered in 2008 have already gone a long way in
anticipating the global economy's slide into recession and the
hit to corporate earnings that will be reported in coming
months. []
The MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> climbed 1.6 percent to a two-month peak, taking
gains on the first two trading days of 2009 to nearly 3 percent
after a record 53 percent plunge last year.
Japan's Nikkei average <> gained 2.1 percent in a
shortened session to reach a two-month high, led by Honda Motor
Co <7267.T> and other exporters thanks to a weaker yen.
Hong Kong's Hang Seng index <> rose 1.8 percent,
boosted by a 2.2 percent increase in China Mobile <0941.HK>.
GEOPOLITICAL RISK SUPPORTS OIL
Oil prices climbed $1.36 a barrel to $47.72 <CLc1> as OPEC
production cuts took effect and an Iranian military commander
reportedly called for an oil boycott over Israel's ground
offensive in the Gaza Strip to counter militant rocket attacks.
[]
Russia's move to cut natural gas supplies to the Ukraine
also showed signs of affecting Central European countries.
The U.S. dollar was steady, holding near a three-week high
against the yen, receiving some support on hopes for a big
spending package from the Obama administration.
The dollar edged up to 91.96 yen <JPY=>, up from around
91.75 yen late on Friday in New York.
The euro dropped 0.2 percent to $1.3895 <EUR=> after a 10
percent pop last month. Traders said the single currency's
surge in December was due to factors such as investors
repatriating funds before year-end and was likely overdone.
The Australian dollar climbed to its highest in almost
three months above $0.7160 <AUD=> before backing down a bit to
$0.7141.
Asian currencies continued to be at risk of weakness as a
result of their economies' exposure to slow global demand.
Investors will likely be drawn to currencies where policymakers
have been taking aggressive steps to protect industry.
"The dramatic weakness in external demand recorded
throughout Asia during the last months of 2008 will intensify,
putting pressure on currencies," said Patrick Bennett, Asia
foreign exchange and rates strategist with Societe Generale in
a note to clients.
Both low-risk Japanese government bonds and U.S. Treasuries
took a hit on the rebound in stocks.
The benchmark 10-year JGB yield <JP10YTN=JBTC> rose 3 basis
points to 1.195 percent, up from a five-year low hit last week.
Ten-year Treasury notes <US10YT=RR> dropped 16/32 in price to
yield 2.417 percent, up nearly 40 basis points after touching
their lowest levels since the 1950s in December.
With government bond yields so low and equity markets
uncertain, many large investors have focused on the value of
investment grade corporate bonds, especially from Asian
issuers.
Default rates in Asia remain low and cash balances
relatively high, though bond prices imply a surge of failures
over the next few years.
Asia is in a much healthier financial position now than it
was during the 1997-98 crisis and at current levels, all
sectors of Asian local bonds look attractive, said Rajeev De
Mello, head of Asian investment at Western Asset Management,
which has $585.5 billion in assets under management.
"In terms of risk-aversion, I believe that we have already
seen the worst of that, De Mello said in a note.
(Additional reporting by Elaine Lies in TOKYO; Editing by
Lincoln Feast)
