Asian stocks edge up on possible U.S. rate cut

Asian stocks edge up on possible U.S. rate cut

SINGAPORE (Reuters): Holiday-thinned Asian equity markets were mostly higher on Monday aided by expectations of further U.S. rate cuts and some local factors.

Markets in Singapore, Indonesia, China, Thailand and Malaysia were shut for a public holiday.

Shares in Tokyo finished higher after being weighed down earlier as investors opted to take profits specifically in technology shares upon returning from the Golden Week.

But the market climbed after new premier Junichiro Koizumi's much-awaited policy speech.

"There's not much fresh stuff in the speech, it seems, but hopes that economic reforms may finally come to Japan have outweighed investors' urges to grab profits after last week's strong gains," said Masatoshi Sato, equities manager at Mizuho Investors Securities.

The Nikkei 225 Index closed up 107.77 points, or 0.75 percent at 14,529.41.

Providing positive sentiment to the Asian equity markets was the increasing likelihood the U.S. Fed would cut interest rates by 50 basis points to spur growth at its next Federal Open Market Committee meeting (FOMC) on May 15, analysts said

Fueling this view was the release on Friday of the worst monthly U.S. jobs report for April in a decade.

Spillover from Wall Street was expected to lead to stronger opening in the European courses with the healthcare sector in focus after Switzerland's Novartis bought a strategic stake in rival Roche

However, with the London stock exchange closed for a national public holiday, trading in Europe overall is likely to be more subdued than usual, traders said.

After initially being sold down, U.S. equities closed in positive territory with the Dow Jones Industrial Average finishing up 154.59 points or 1.43 percent, at 2,191.53 and the technology-laced Nasdaq Composite Index ending up 45.33 points, or 2.11 percent, at 2,191.53 points.

"The (initial) sell-off was caused by people feeling the economy was weakening more than initially thought, but after thinking about it, they see it could push the Fed to be aggressive in cutting rates," said Joseph Stocke, a fund manager at StoneRidge Investment Partners. "People are looking ahead six to nine months when the economy will be recovering."

After Koizumi's speech, the yen rose against the dollar, recovering from earlier selling pressure and was quoted around 121.20 yen from 121.70 earlier in the day.

The euro, meanwhile, was subdued as it held in a tight range around 0.8915 against the dollar.

A rally in global banking giant HSBC Holdings and property sectors underpinned the Hong Kong bourse.

HSBC was up after taking a beating late last week on speculation it may make a bid for Merrill Lynch while property counters were supported by renewed U.S. rate cut expectations.

At 0630 GMT (1 p.m. Jakarta time), the benchmark Hang Seng Index was up 1.72 percent at 13,621.65.

Shares in Manila dipped on concerns about violence going into next week's election prompting some light selling pressure.

The market remained nervous even though President Gloria Macapagal Arroyo lifted the state of rebellion at midnight on Sunday saying public order had been restored.

The main index closed down 0.73 percent at 1,431.91.