* Overnight gains on Wall St support Asian stocks
* Crude rallies $3 a barrel, dollar retreats
* Deep recession fears linger
(Updates with latest Asian prices, European pre-open)
By Rafael Nam
HONG KONG, Oct 17 (Reuters) - Asian shares rose on Friday
after encouraging earnings signals from technology firms such
as IBM and a slowly improving tone in beleaguered short-term
money markets helped ease concerns about a global recession.
Asian stocks posted their first weekly gain in seven, with
advances in the last trading day underpinned by a rally on Wall
Street on Thursday that sent the Dow Jones industrial average
<> up more than 4 percent.
European shares were set to surge, with major indexes such
as Britain's FTSE 100 <> seen up by more than 4-5 percent.
Oil prices rose nearly $3 a barrel, helped by the equity
gains and growing expectations for an OPEC production cut
following a tumble in crude.
But jitters remain after a volatile week that saw global
stock markets rally and slump on alternative days amid signals
of a potentially deep economic slowdown worldwide.
The dollar sagged against the euro, but the U.S. currency
held steady against the yen.
"There's still nervousness in the market about the real
economy, but in terms of valuations the price is good right
now," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ
Securities in Japan.
"The economic problems are the main theme of the market
right now and everybody knows this, so rises will be limited."
The MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> was up 0.6 percent at 0630 GMT, after slumping
8 percent the previous session.
The index had gained around 1 percent for the week as of
early afternoon, its first weekly gain since the end of August.
Friday's tone was helped by some encouraging earnings
signals. International Business Machines Corp (IBM) <IBM.N>
said on Thursday it expects to meet long-term profit forecasts,
partly due to continued growth in emerging markets.
[]
Meanwhile, U.S. firms such as Internet search leader Google
Inc <GOOG.O> and chip maker Advanced Micro Devices Inc <AMD.N>
posted results after U.S. market hours that beat expectations.
On the credit front, recent unprecedented measures by
central banks to inject liquidity into the financial system
appeared to be bearing some fruit.
U.S. dollar short-term funding costs eased for the fourth
day in Asia, though stress remained in several local markets
due to heightened counterparty and term risks. []
But analysts warned investors would be unlikely to steer
their attention from concerns over the global economy.
"The focus of the market is now shifting gradually to the
weakness of the real economy," said Minoru Shioiri, chief
manager of forex trading at Mitsubishi UFJ Securities.
Data on Thursday showed U.S. industrial output posted its
biggest drop since 1974 in September, while a regional factory
index slumped and labour markets showed softness.
[]
Japan's Nikkei average <> rose 2.8 percent, clawing
back after falling 11.4 percent on Thursday in its biggest loss
since the 1987 crash.
Singapore stocks <.FTSTI> rose 0.5 percent, while
Shanghai's main index <> advanced 1 percent.
But other major indexes in the region fell. Stocks in South
Korea <> and Taiwan <> dropped more than 2 percent
each. Australian stocks <> lost 1 percent, India's
benchmark index <> slipped 0.5 percent, while Hong Kong
shares <> were flat.
OIL RALLY
The gains in equity markets, however tentative, bolstered
oil prices. U.S. crude futures for November delivery rose $2.9
to $72.79 a barrel, reversing a decline of more than 6 percent
during U.S. trade on Thursday.
Base metal prices also rallied, with London Metal Exchange
copper, zinc and lead all up sharply percent in Asian trade.
In currency markets, although the dollar sagged against the
euro it held flat near the yen in choppy trade as some
investors remained concerned about a global recession.
"Fears about financial institutions going under have eased
since the Group of Seven meeting last week as governments
showed readiness to pump in public funds," said Takahide
Nagasaki, chief forex strategist at Daiwa Securities SMBC.
"The easing of such fears is slowly reversing a previously
seen flight to safety into such currencies as the yen,"
Nagasaki said.
The euro <EUR=> was up 0.4 percent from late Thursday New
York trade at 1.3505, while the dollar held steady against the
yen <JPY=> at 101.51.
(Editing by Dhara Ranasinghe)
