* U.S. economic data boosts New Year optimism
* Australian stocks, shares under pressure on floods
* Nikkei share average at 7-1/2 month high
* Oil at highs on recovery hopes, winter demand
By Sanjeev Miglani
SINGAPORE, Jan 4 (Reuters) - Japanese stocks led Asian
equities higher, climbing to their highest since May, and oil
prices were perched near a 27-month high on Tuesday, with
investors betting the improving U.S. recovery may be reflected
in jobs data later in the week.
The dollar also rose while U.S. Treasuries dipped in Asia
as investors kicked off the year turning to riskier assets
such as high-yield credit, on signs that growth in the world's
biggest economy may accelerate in 2011.
The big test for the U.S. economy comes later this week
when the government will publish its December jobs report
after a report that manufacturing activity increased in
December at its fastest clip in seven months. U.S. stocks hit
two-year highs overnight, though the March S&P 500 future
<SPc1> was steady.
Japan's Nikkei stock average closed 1.65 percent
higher at its highest level in 7-1/2 months, led by resource
companies, as oil and commodity prices rose on the stronger
economic growth outlook this year.
"Market players are now focusing on the U.S. payrolls data
due on Friday, which will likely have an impact on both Wall
Street shares and the dollar/yen rate," said Kazuhiro
Takahashi,
general manager at Daiwa Capital Markets in Tokyo.
Stocks are also getting a boost from the "January effect"
when fund managers are no longer distracted by year-end window
dressing and instead focus on stocks they find attractive,
traders said.
The MSCI index of Asia Pacific shares excluding Japan
was largely unchanged on the day, just shy of
a 2-1/2-year high hit in November.
The Shanghai Composite Index was up 1.4 percent,
supported by a 5 percent jump in property stocks as worries
about further monetary tightening eased after surveys
indicated that Chinese factory inflation may be abating.
[]
Accelerating inflation and record house prices have led
China's central bank to signal time and again in recent months
that the country needs "prudent" monetary policy to curb
price pressures and prevent asset bubbles.
But a fall in the official purchasing managers' index in
December over the previous month held out hope that inflation,
running at its highest in over two years, may be peaking soon.
"2011 may witness the start of a new round of the growth
cycle, driven by regional economic development and industry
restructuring," said Huatai-PineBridge Fund Management Co fund
manager Qin Lingsong.
"Chinese corporate profits are expected to rise 15-20
percent annually, which lends strong support to current
valuations."
Still, investor Jim Rogers said inflation remained a top
concern for Chinese policymakers.
"But I think they'll be more tightening in China because
the Chinese do have a serious inflation problem..... And
they're determined to kill it," he told Reuters Insider TV
[]
While the mood was upbeat across much of Asia, shares in
Australia underperformed the region, and both the Australian
and New Zealand dollars were under pressure because of worries
over the impact of floods in northeast Australia.
Heavy flooding in Queensland has cut coal exports and
hurt wheat production. Miners such as Rio Tinto have
declared force majeure and cut coal exports to a trickle.
"The lights were flashing a very verdant green at the
start of the session but now it has fizzled. I suspect it will
come back a bit later," said Michael Heffernan, strategist at
Austock Group.
"The floods are likely to have some impact on coal stocks."
The S&P/ASX 200 index was 0.06 percent lower while the
Australian dollar fell to 0.9 percent to US$1.0068.
DOLLAR GAINS, TREASURIES DECLINE
The U.S. dollar was stronger, rising 0.6 percent to 82.20
yen , having bounced from an eight-week low of 80.93 yen
hit on trading platform EBS on Monday. Analysts expect more
traction for the greenback in the months ahead as the recovery
gathers strength.
The euro eased slightly after last week's short-covering
surge, with some traders citing talk of euro-selling by
investors related to euro zone bond redemptions. "There is
lots of talk about German bond redemptions today," said a
trader for a European bank in Singapore.
The benchmark 10-year Treasury notes were down
5/32 in price to yield 3.35 percent, ahead of a raft of U.S.
data including November factory orders and December vehicle
sales figures later on Tuesday.
Sensing hunger among international investors for higher
yield, the Philippines has embarked on a $1.5 billion, 25-year
global peso bond sale. The maturity is longer than the initial
plan to sell bonds of 10 to 20 years maturity and the amount
being raised has been increased, indications that demand for
the paper is high. []
"The favourable economic fundamentals will attract foreign
interest. External liquidity indicators are good and should
provide strength to the peso. From those perspectives there
should be adequate interest for the global peso bond," said
Joey Cuyegkeng, analyst with ING.
Oil <CLc1> was steady at $91.60, near its highest levels
in more than two years as accelerating manufacturing activity
in the U.S. and frigid winter weather fanned optimism that
U.S. crude inventories will continue to drain.
Copper futures opened at a record high in London on
Tuesday after the New Year break, chasing a rally in New York
which touched an all-time high in the previous session.
(Additional reporting by Ayai Tomisawa and Antoni Slodkowski
in Tokyo, Ian Chua in Sydney, Umesh Desai and Vikram
S.Subhedar in Hong Kong and Samuel Shen in Shanghai, Editing
by Kevin Plumberg)
