RPT-GLOBAL MARKETS-Asian shares extend rally, caution sets in

                                
 * Asian shares gain on financials; auto makers rally
                                
 * Safe-haven yen also gains, denoting lingering caution
                                
 * NZ dollar tumbles after central bank warns on economy
                                
 * Oil drops on U.S. stockpile report; gold holds firm
                                
 By Rafael Nam
                                
 HONG KONG, April 1 (Reuters) - Asian stocks started the new
quarter with more gains after an impressive performance in
March on expectations the frail global economy is about to
bottom out and hopes the financial system was on the mend.
                                
 However, the safe-haven yen also rose on concerns about the
fate of General Motors Corp <GM.N> and Chrysler, in a possible
sign that more bad news could spur investors to ditch riskier
assets just as quickly as they piled in on March.
                                
 Oil prices dropped more than 2 percent, dragged down by an
industry report showing a larger-than-expected rise in U.S.
crude stocks, while gold prices held firm.
                                
 Leaders from the G20 group of the world's biggest economies
meet on Thursday with little hope they will find concrete
solutions to the worst global economic crisis in decades.
[ID:nLA715782]
                                
 Evidence of economic weakness abound. Data on Wednesday
showed Japanese business confidence tumbled to a record low,
while reports on Tuesday showed plunging U.S. home prices and
consumer confidence holding at just above record lows.
[ID:nT189222] and [ID:nN31416180]
                                
 Still, deep interest rate cuts by major central banks --
with the European Central Bank expected to cut its benchmark
again on Thursday -- and stimulus measures are at least
comforting stock markets in Asia, which enjoyed in March their
best month in a decade.
                                
 "The market environment has turned fairly positive. Easier
monetary policy worldwide have allowed more liquidity to flow
into markets," said Kwak Joong-bo, a market analyst at Hana
Daetoo Securities in Seoul.
                                
 The MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> rose 0.7 percent as of 0330 GMT, building on
gains of 14.6 percent in March.
                                
 Financial shares such as National Australia Bank <NAB.AX>
and KB Financial Group <105560.KS> were among the leading
gainers.
                                
 Although banks in the region did not hold as many of the
junk investments that hurt some of their global rivals, their
shares have suffered nonetheless on concerns about the broader
financial system.
                                
 "People are feeling a lot more confident about banks," said
Chris Halls, a fund manager with Argo Investments Ltd in
Australia.
                                
 South Korean auto makers such as Hyundai Motor <005380.KS>
also surged on hopes they will gain market share at the expense
of struggling U.S. rivals.
                                
 GM warned on Tuesday there was a rising chance it could
file for bankruptcy by June, as Fiat SpA <FIA.MI> and Chrysler
executives met in a race to complete a tie-up the U.S.
government says Chrysler needs to survive. [ID:nN31405983]
                                
 U.S. stock futures had been hit during Asia trade on
Wednesday after Bloomberg reported U.S. President Barack Obama
had decided on a pre-packaged bankruptcy for GM. A senior
administration official later called that report "inaccurate."
[ID:nWEN6720]
                                
 CAUTION REMAINS
                                
 The concerns over U.S. auto makers did not prevent Asian
shares from extending their winning streak with markets in
Japan <.N225>, South Korea <.KS11> and Taiwan <.TWII> leading
with gains of nearly 2 percent.
                                
  Currency investors were more cautious, sending the
safe-haven yen higher.
                                
  The dollar index <.DXY>, a gauge of its performance
against six major currencies, rose 0.3 percent to 85.773
<.DXY>, but off an earlier high of 85.940. But the dollar fell
0.4 percent from late New York trade to 98.60 yen <JPY=> after
tumbling as low as 98.21 yen on trading platform EBS.
                                
 The New Zealand dollar <NZD=> fell more than 2 percent and
its debt rallied strongly after the country's central bank
warned the outlook for the recession-hit economy remained weak
and the bank would be keeping rates low for some time.
                                
  "Investors fear that RBNZ may adopt unconventional methods
of easing monetary policy, if financial conditions continue to
tighten," said Bank of NZ currency strategist Danica Hampton.
                                
 The NZ dollar <NZD=D2> fell to a low of $0.5558, from
$0.5700 before the statement. It was trading at $0.5576/80 at
0100 GMT.
                                
 U.S., British and Japanese central banks have turned to
unconventional steps to pump funds into their economies,
including outright buying of government and corporate debt.
                                
 It is not clear whether the European Central Bank will
follow suit, though analysts do widely expect it to cut its
main interest rate by 50 basis points to a record low of 1
percent at its policy meeting on Thursday.
                                
 The euro was down 0.5 percent to $1.3185 <EUR=>.
                                
 In commodity markets, U.S. crude for May delivery <CLc1>
slid $1.20 to $48.50 on a report from the American Petroleum
Institute showing U.S. crude stocks rose by a
greater-than-expected 3.3 million barrels in the week to March
27. [API/S]
                                
 Gold <XAU=> held firm at $920.35 an ounce from its New
York's notional close of $917.15 on Tuesday.