* Gain in oil prices broadly lift commodity prices
* Resource stocks rise, financial sector shares weaken
* U.S. dollar bucks trend and rises with oil
(Updates prices, adds quote, European outlook)
By Kevin Plumberg
HONG KONG, Aug 14 (Reuters) - Oil rose above $116 a barrel
on Thursday, boosting recently beaten-down commodity prices and
stoking inflation fears, which hit shares in the financial
sector.
European equities were expected to open slightly higher,
led by strength in mining and energy shares with investors also
bracing for euro zone gross domestic product data due later.
The popular trade of betting on strength in raw materials
prices because of solid growth in developing countries while
selling off the unstable financial sector had been seriously
tested in recent weeks as the U.S. dollar rallied to a
six-month high against the euro. []
However, a U.S. government report on Wednesday showing a
decline in crude inventories has investors thinking about
resource scarcity again, proving bets on higher oil prices are
difficult to reverse completely even with the U.S. dollar
showing sustained strength.
The September contract for U.S. light crude <CLc1> edged up
44 cents to $116.45 a barrel in early trade, after jumping $3
overnight.
On Tuesday, crude dropped to a three-month low of $112.31
and is still more than 20 percent below a record $147.27
reached a month ago.
Metals prices marched higher in tandem with oil, with gold
up 0.7 percent to $831.30 an ounce <XAU=> after touching a 2008
low just below $802 on Tuesday.
Resource-related shares in Japan such as Sumitomo Metal
Mining Co Ltd <5713.T> and shipping firm Mitsui OSK Lines Ltd
<9104.T> were among the top percentage gainers in the Nikkei
share average <>.
However, worries about Japan's economy pushed the index
down 0.5 percent, led by shares of Softbank Corp <9984.T>,
Japan's third-biggest mobile phone operator, which fell 4.6
percent.
"Even though the GDP matched expectations, the fact that it
showed falling consumption and weaker exports has forced people
to realise once again that things really aren't good with the
economy," said Takashi Ushio, head of the investment strategy
division of Marusan Securities.
Data on Wednesday showed Japan's economy shrank in the
second quarter at the sharpest pace since its last recession in
2001, keeping intact expectations for steady rates.
The MSCI Asia-Pacific ex-Japan index <.MIAPJ0000PUS> edged
up 0.1 percent but is still down more than 30 percent since
hitting an all-time high last November. It fell to a 17-month
low on Wednesday.
Australia's benchmark S&P/ASX 200 index <> rose 0.6
percent, led by top mining firms BHP Billiton Ltd <BHP.AX> and
Rio Tinto Ltd <RIO.AX>. But the country's major banks all
dragged on the index.
Hong Kong's Hang Seng index <> slipped 0.1 percent.
Shanghai's composite index <> fell 0.6 percent,
holding slightly above Wednesday's 19-month low, as data showed
China's industrial output growth in the first seven months of
the year slowed markedly.
COMMODITY BULLS BEWARE
Despite the rally in crude prices, many analysts do not
think the short-term downward trend in commodity prices has
changed, especially with growth data in both developed and
emerging markets reflecting a slowdown.
Wednesday's 2.4 percent rise in the Reuters-Jefferies CRB
index of 19 commodity futures <.CRB> did not come very close to
testing a trendline that stretched down from an all-time high
hit in early July.
"Europe is starting to weaken and Japan is on the verge of
a recession. Commodities thrive on good news and there is not
much of that about," said Mark Pervan, senior commodity analyst
with Australia and New Zealand Banking Group Ltd in Sydney.
Crude prices rose despite strength in the U.S. dollar. The
two have often traded very closely together, with a decline in
one coinciding with a rise in the other.
Yet, the euro was down 0.2 percent to $1.4887 <EUR=>,
creeping back down toward the six-month low around $1.4812 hit
on Tuesday.
Against the yen, the dollar slipped 0.1 percent to 109.52
yen <JPY=>, about 1 yen below a seven-month high hit earlier in
the week.
Few indications in the market showed investors had regained
their willingness to take bigger risks for higher returns, an
environment that favours government bonds and hurts
high-yielding currencies.
Indeed, the Australian dollar <AUD=> was down 0.5 percent
to US$0.8705 and the New Zealand dollar <NZD=> fell 0.4 percent
to US$0.6995.
Ten-year Japanese government bond futures <2JGBv1> climbed
to a four-month high, having risen 4.3 percent in the last two
months.
