GLOBAL MARKETS-Japan at 4-mth high on global economy hopes

                                
 * Nikkei at 4-mth high on global economy hopes, shippers
gain
                                
 * Improvement in China manufacturing, S.Korean exports
                                
 * Aussie and higher-yielding currencies hold gains
                                
 * Labour day holidays limit trade, U.S. ISM report eyed
                                
 By Eric Burroughs
                                
 HONG KONG, May 1 (Reuters) - Japanese stocks struck a
four-month closing high on Friday and higher-yielding
currencies held gains as investors favoured riskier assets,
with improvements in Chinese manufacturing and South Korean
exports adding to evidence of a global economy on the mend.
                                
 Many markets in Asia and Europe were closed for labour day
holidays, but British and U.S. markets will be open. The FTSE
100 <.FTSE> was expected to slip about 1 percent at the open,
according to financial bookmakers.
                                
 Stock markets around the world have surged this week on
mounting confidence the global economy is starting to pull out
of a deep recession sparked by the financial crisis, especially
with the hard-hit U.S. economy showing signs of bottoming out.
                                
 A slower-than-expected drop in South Korean exports in
April and signs of U.S. regional manufacturing activity picking
up all pointed to the risk of an upside surprise in figures
from the U.S. Institute for Supply Management's factory survey
for April. [ID:nSEO371627]
                                
 The ISM index, due to be released later on Friday, is
widely seen as a solid leading indicator for U.S. and global
activity.
                                
 But some analysts remained cautious and said investors may
be getting ahead of themselves given the still shaky state of
financial markets.
                                
 "The news out there is much less worse than it's been, but
that doesn't mean everything is fixed," said Lucinda Chan,
division director at Macquarie Equities in Sydney. "The green
shoots theory is happening out there, but it's slow and
steady."
                                
 Japan's Nikkei average <.N225> rose 1.7 percent despite
more bleak data showing the economy slipping back into
deflation and unemployment rising at a record pace in March to
a four-year high. [ID:nT316908]
                                
 But the MSCI index of Asia-Pacific shares <.MIAPJ0000PUS>
outside Japan dipped 0.2 percent and pulled back from a
six-month high, mainly on a slight drop in Australian shares
<.AXJO>. Most markets included in the index were closed.
                                
 In April, the MSCI Asia-Pacific ex-Japan soared 14.6
percent -- its biggest monthly gain in a decade.  The MSCI
index of world stocks <.MIWD00000PUS> posted its biggest
monthly increase ever in its two-decade history last month.
                                
 Corporate news also helped boost confidence. Shares of
Canon <7751.T>, the world's largest digital camera maker,
jumped 6.1 percent after it lifted its annual outlook.
                                
 Japanese shipping companies <.ISHIP.T> gained 5 percent on
the brightening outlook for global trade. Nippon Yusen KK
<9101.T>, Japan's biggest ocean shipping company, gained 4.7
percent.
                                
 Chrysler's bankruptcy filing and the spread of influenza A,
known as swine flu, did little to stem the budding optimism
about global growth.
                                
 Some analysts have said that the equity rally, led by a
sharp rebound in Asian markets, may have more room to run
because investors had been so pessimistic about the outlook and
many are still hoarding funds in cash.
                                
 From the lows hit two months ago, the benchmark MSCI index
of Asian shares has surged as much as 40 percent -- taking it
into bull market territory.
                                
 The stock market gains have spurred selling of safe-haven
government bonds and driven U.S. Treasury yields to their
highest in five months, threatening to undercut the Federal
Reserve's efforts to keep a lid on interest rates by buying
bonds.
                                
 Benchmark 10-year Treasuries <US10YT=RR> dipped 1/32 in
price to yield 3.119 percent, little changed from late U.S.
trade and keeping the two-year/10-year yield curve near its
steepest levels since November.
                                
 But Japanese government bonds bucked the stock market gains
and pushed higher as investors took advantage of the rise in
yields to allocate funds. Benchmark 10-year JGB yields
<JP10YTN=JBTC> edged down 2.5 basis points to 1.395 percent.
                                
 Trading in currencies was subdued. The dollar edged up 0.4
percent to 99.00 yen <JPY=>, while the Australian dollar was up
1 percent at 72.20 yen <AUDJPY=R> and 0.5 percent at $0.7290
<AUD=D4>.
                                
 When risk appetite improves, market players use the yen --
still the lowest yielding of major currencies -- as a source of
funds to buy higher-yielding currencies in the carry trade.
                                
 Improving confidence among Japanese investors has also
prompted them to start shifting more funds abroad in search of
higher returns -- even via U.S. junk bonds. [ID:nT370077]
                                
 "This confidence is spreading in the equity markets and
risk appetite is growing more and more. As a result the yen is
being sold broadly," said Toru Umemoto, chief FX strategist
Japan at Barclays Capital in Tokyo.
                                
 (Additional reporting by Miranda Maxwell in Melbourne and
Charlotte Cooper in Tokyo; Editing by Neil Fullick)