* Investors shed defensive sectors as equity rally rolls on
* Euro slips as Germany economy contracts more than
expected
* Oil in striking distance of $60
* Institutional investors taking on more risk - State
Street
(Repeats to more subscribers)
By Kevin Plumberg
HONG KONG, May 15 (Reuters) - Asian stocks rose on Friday
as investors bought shares that stood to benefit the most from
an expected global recovery, but were set for their biggest
weekly decline since March as volume thinned and some recent
gains were cashed in.
U.S. stock futures rose 0.2 percent <SPc1>, while major
European stock futures were up 0.6 percent, after an overnight
rise on Wall Street kept optimism about a recovery going
despite a record contraction of the German economy in the first
quarter.
The euro <EUR=> slid against the dollar after Germany
reported gross domestic product shrank 3.8 percent, worse than
expected, while the dollar slipped against the yen <JPY=>, with
dealers focused on pushing it below its 100-day moving average.
But investors were still looking to buy riskier assets
after a leading indicator of Japan's economy, one of the
hardest hit in Asia, was not as bad as expected.
The data supported a regional theme that companies are
replenishing deleted inventories as orders trickle in and the
sharp decline in Asian exports is slowing.
However, consumer demand in the United States and Europe
remains weak, and a sustainable global recovery is unlikely
until confidence in those major markets returns.
Oil prices ticked higher, though were having difficulty
hurdling $60 a barrel, especially after the International
Energy Agency said on Thursday global demand for crude will
reflect the sharpest decline this year since 1981.
Japan's Nikkei share average <> rose 1.9 percent, with
a 7 percent gain in Sony Corp stock <6758.T> among the biggest
boosts to the index after the company forecast a
smaller-than-expected annual loss.
"Despite a series of dismal earnings this time around, a
sense of relief has spread in the market that nothing worse
will likely come out at least until April-June earnings
announcements," said Fumiyuki Nakanishi, a manager at SMBC
Friend Securities in Tokyo.
The MSCI index of Asia Pacific stocks outside Japan
<.MIAPJ0000PUS> was up 1.8 percent. The materials, financial
and technology sectors were the largest gainers, while
utilities rose just 0.6 percent.
The index was down around 2.7 percent for the week and set
to post its biggest weekly decline since early March, as
economic data reminded investors that the road to recovery is
likely to be a long and painful one.
However, it is still up 42 percent since March 9, when the
global equity rally began.
Equity markets were generally still seen in a bear market
rally, which are common during recessions. For example, during
the U.S. recession in the early 1980s, the S&P 500 had two
major bear market rallies that were each negated by subsequent
declines.
The ICE futures U.S. dollar index <.DXY>, which tracks the
currency's performance against a basket of six major
currencies, was on the cusp of posting its fourth weekly
decline, as investors increasingly shift to higher-yielding
currencies.
In the last week, emerging market equities and bonds have
been the biggest beneficiaries, with institutional investors
apparently unperturbed by a rapid rise in valuations.
"Institutional investors are not about to change course or
U-turn, they are still backing the rally," said analysts with
State Street Global Markets in a note that track 15 percent of
the world's tradeable assets.
"Flows do not suggest that investors are nervous that
prices have gotten ahead of themselves. If anything, the
opposite is true," they said.
The growing willingness of investors to take bigger risks
for the prospect of higher returns is dependent to some degree
on a steady diet of positive economic surprises. Negative ones,
like lower than expected U.S. retail sales this week, dent
confidence.
The New Zealand dollar tumbled 0.6 percent against both the
U.S. dollar <NZD=> and the yen <NZDJPY=R> after data showed
retail sales volume falling by the most on record.
U.S. crude for June delivery was trading around $58.65 a
barrel <CLc1>, largely unchanged on the day. Oil dealers were
caught between bullishness based on rising equity markets and
uncertainty about the outlook for fuel demand.
(Additional reporting by Aiko Hayashi in TOKYO)
(Editing by Kim Coghill)
