Asian shares rebound on record Dow close, U.S. data

(Reuters) - Asian shares rebounded from three days of losses on Friday as new U.S. data suggested a steady recovery in the world's largest economy, bolstering investors' risk appetite while underpinning the dollar against the yen.
European markets were seen pausing after surging to fresh 4-1/2 year peaks on Thursday, with financial spreadbetters predicting London's FTSE 100 .FTSE, Paris's CAC-40 .FCHI and Frankfurt's DAX .GDAXI to open between a 0.1 percent rise and a 0.2 percent fall. .L.EU
A 0.1 percent gain in U.S. stock futures pointed to further strength in Wall Street.
The Dow Jones Industrial Average .DJI extended its record close on Thursday and the Standard & Poor's 500 Index .SPX closed just a hair below an all-time closing high on a lower-than-expected weekly U.S. jobless claims report. .N
The MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.4 percent, after falling earlier in the week as investors took profits from regional rallies that took some indexes to record peaks or multi-year highs.
The index was set for a weekly decline of around 0.9 percent, whittling down its gains for the year to date to just under 3 percent.
"Initial glumness at the prospect of potentially no further rate cuts today gave way to a far cheerier mood from investors, which was more in alignment with the mood from offshore markets," said Tim Waterer, senior trader at CMC Markets of Australian shares .AXJO, which led the gains in the Asian-Pacific region with a 1.8 percent rally.
The Australian dollar, often used as a gauge for investor risk appetite, was at $1.0372, not far from Thursday's five-week high touched after a strong local employment data reduced the chances for a rate cut by the Reserve Bank of Australia.
Hong Kong .HSI shares rose 0.5 percent and Shanghai shares .SSEC soared 1.3 percent, led by banking and railway counters on restructuring of the mainland's vast rail operations.
South Korean shares .KS11 underperformed with a 0.6 percent drop, as heavyweight Samsung Electronics slipped after the launch of its new smartphone, but losses were limited by a rebound in auto shares, which were buoyed by a weaker won.
YEN, NIKKEI AND ABE
Japan's Nikkei stock average .N225 was among the regional outperformers, climbing 1.3 percent to a new 4-1/2-year peak after parliament approved Haruhiko Kuroda as the next governor of the Bank of Japan and his two new deputies.
Markets are expecting the BOJ to take more aggressive easing measures, possibly as soon as its next scheduled policy meeting on April 3-4.
"We see several signs of a little bit of overheating in the Japanese market, but strength in the overseas market serves as a tailwind to Japanese equities," said Hiroichi Nishi, an assistant general manager at SMBC Nikko Securities.
Expectations that the new BOJ leadership will accommodate reflationary policies sought by Prime Minister Shinzo Abe as part of his economic revival plan have driven yen selling and share buying for the past four months.
Some market observers say the premiums based on such expectations are now fully priced in to the dollar, which may be topping out against the yen, as seen in risk reversals -- or put and call options -- flipping toward bets that the yen will rise.
"As the actual BOJ meeting approaches, some people are getting scared," said Daisuke Karakama, market economist for Mizuho Corporate Bank in Tokyo, adding Kuroda may run out of new policy options in the next three to four meetings and may revert to conventional buying of government bonds.
"Fundamental supply/demand related reasons justified selling the yen down to 90, but the additional 5-6 yen to current levels is purely due to the Abe premiums. Now, it's a tug-of-war with the Japan-specific yen selling and the dollar buying based on the strength of the U.S. economy," Karakama said.
The dollar was trading at 96.16 yen, nearing Tuesday's high of 96.71 yen, its peak since August 2009.
ENCOURAGING U.S. DATA
U.S. data showing a lack of broad price pressures on Thursday left scope for the U.S. Federal Reserve to keep in place the very accommodative monetary policy that has helped support asset prices around the world.
The dollar index .DXY eased to 82.536 but stayed close to its seven-month high of 83.166 touched on Thursday.
"With the U.S. dollar converting from a funding towards an asset currency, we would expect bullish emerging markets trades to be funded in low-cost, fundamentally weak G-10 currencies" such as the yen, the euro and sterling, Morgan Stanley said in a research note.
Crude oil was up 0.2 percent to $93.25 a barrel while Brent rose 0.5 percent to $109.46. <O/R>
"The numbers we are seeing in the United States are a result of the cheap money that has been available," said Jonathan Barratt, chief executive of Sydney-based commodity research firm Barratt's Bulletin.
London copper gained 0.4 percent to $7,829 a tonne and was set to close higher for a second straight week after the latest sign of a recovery in the global economy, but muted buying from top consumer China curbed upside momentum.
(Additional reporting by Ayai Tomisawa in Tokyo, Manash Goswami in Singapore and Thuy Ong in Sydney; Editing by Eric Meijer & Kim Coghill)

md.  Shane Haider

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