(Updates prices, details on Japan crisis)
* Asian stocks stabilise as Nikkei rebounds from big losses
* More upbeat Federal Reserve view also helps calm nerves
* Nikkei closes up 6%, though nuclear crisis worsens
* Yen slips vs dlr after coming close to record high
* Bahrain unrest lifts oil from 3-week low
By Raju Gopalakrishnan
SINGAPORE, March 16 (Reuters) - Asian financial markets
rallied on Wednesday, with Tokyo stocks rebounding 5.7 percent
after a steep two-day sell-off on Japan's killer earthquake and
unfolding nuclear crisis.
Other Asian stock markets were also higher, but another fire
at the earthquake-damaged Fukushima Daiichi nuclear plant north
of Tokyo and fears of more radiation leaks kept investors on
edge and Tokyo stocks volatile.
European shares were expected to open little changed as
investors watched developments in Japan, while U.S. stock index
futures were flat.
"The market in general understands that Japanese shares are
oversold, but uncertainty over the Fukushima nuclear power plant
is clearly making market participants very nervous," said
Kazuhiro Takahashi, general manager at Daiwa Securities Capital
Markets.
Asian markets also received a filip from U.S. stocks, which
closed down but off lows as a more upbeat view from the Federal
Reserve helped limit Japan-related losses. The Fed stuck with
its ultra-loose monetary policy but said the economy was gaining
traction.
The gains in Tokyo stocks were led by short-covering by
hedge funds, analysts said, adding that the market was still
extremely volatile.
"The rebound is pretty strong as investors realised they may
have panicked a bit too much yesterday," said Fujio Ando, senior
managing director at Chibagin Asset Management.
"But it's mostly short covering by both domestic and foreign
players, and not honest, active buying, because nuclear worries
are still strong. If we hear anything about the nuclear
situation improving, investors will aggressively pile into the
Nikkei."
Japan's Nikkei average surged 5.68 percent, clawing
back about a third of its losses since a massive earthquake and
tsunami hit the country on Friday, and closing above the
psychologically important 9,000 point level at 9,093.72.
Nikkei futures were up 4.2 percent.
MSCI's index of Asian shares outside of Japan
rose 0.9 percent.
Australian shares closed 0.65 percent up, led by a
relief rally in uranium producers Paladin and Energy
Resources of Australia , which had sunk on Monday on
fears that many countries would scale back or suspend their
nuclear power programmes in light of Japan's woes.
Paladin rose 13.5 percent and ERA 10.3 percent.
Stock markets in South Korea , Taiwan , and
India also gained.
Asian economies will continue to grow strongly this year
even as Japan struggles with the aftermath of its natural
disaster, ratings agency S&P said.
YEN SLIPS BUT REPATRIATION EYED
The yen slid to around 80.8 to the dollar on fears of
intervention by the Bank of Japan after the currency surged
toward its 1995 historic high of 79.75. Speculators were betting
that the Japanese government and companies would liquidate
overseas assets to pay for reconstruction.
The euro was subdued after Moody's downgraded
Portugal's ratings by two notches and was last down
about 0.2 percent on the dollar for the day.
"Event risk is going to play a huge role in deciding what
the yen does this week," UBS currency strategist Gareth Berry
told Reuters Insider.
"The key thing to watch really is what happens to the Nikkei
index in Japan and if equities rebound from their lows. That
will help support risk appetite and that will lead to a slightly
weaker yen.
"The other thing to watch is how things unfold at the
nuclear power plants. Any deterioration there is probably going
to lead to further yen strength and conversely, as we hope the
situation resolves itself safely, we could see risk appetite
improve and that will naturally lead to a slightly weaker yen."
Brent crude oil futures gained 25 cents to $108.77 a
barrel, off a three-week low, as growing tensions in Bahrain
offset a move away from riskier assets on Monday that was
sparked by the Japanese crisis. U.S. crude was up 47
cents at $97.65.
Spot gold was up at $1,398 per ounce, but was yet to
fully recover ground after investors sold off bullion to cover
stock market losses.
(Additional reporting by Anuradha Kanwar, Editing by Richard
Borsuk & Kim Coghill)
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