SINGAPORE, Aug 18 - Asian stocks wafted higher and the dollar was solid on Monday as many investors, trickling back from their summer holidays, focused on signs of a recovery in the world's biggest economy. Oil prices climbed after saboteurs set fire to a crucial Iraqi oil pipeline and renewed unrest in oil producer Nigeria, extending gains after the largest power failure in North American history forced U.S. and Canadian refineries to shut down. The dollar was broadly steady in quiet Tokyo trade as market players returned from "obon" holidays.
The Nikkei stock average <.N225> was challenging the 10,000 mark by midday as investors, encouraged by recent signs of economic recovery in Japan and the United States, piled back into the market after the summer vacation season. Steel makers including JFE Holdings Inc <5411.T> were the best-performing sector, with their sub-index <.ISTEL.T> rising 3.29 percent on the back of continued buying by foreign players. The Nikkei was up 0.99 percent at 9,960.94 after rising as high as 10,015.60 in early trade. The broader TOPIX index <.TOPX> was up 0.79 percent at 972.45. Japan's upbeat gross domestic product numbers last week plus data on rising machinery orders, a key gauge of future capital investment, have helped fuel heavy buying by foreign investors betting on a stronger-than-expected recovery.
"We can see foreigners believe in the scenario of a Japanese and Asian economic recovery," said Mitsugu Kanno, general manager at Shinko Securities' equity information department. South Korean stocks <.KS11> were up 0.83 percent, hitting a new intra-day high for the year with technology stocks leading the way. Taiwan <.TWII> rose 0.43 percent. Hong Kong <.HSI> gained 0.24 percent, Singapore <.STI> 1.3 percent and Australia <.AXJO> 0.51 percent. The broad Morgan Stanley Asia-Pacific index <.MSCIAP> was 0.43 percent higher by late morning.
NIKKEI AND THE DOLLAR
Asian stocks also took a cue from Wall Street, where the market shrugged off the blackout in the Northeast to finish higher. Upbeat U.S. economic indicators in recent weeks, which have bolstered expectations of a swift recovery, were keeping the dollar buoyant. In the latest such sign, the U.S. Federal Reserve said on Friday industrial production jumped an unexpectedly large 0.5 percent in July, posting its biggest gain since January. But the bull run in Japanese stocks was restraining the dollar's gains against the yen, traders said. "I expect the dollar to basically retain a firm tone. But if the market's perceptions on the Japanese economy start to change, there could be a change of tack," said Gen Kawabe, treasury department manager at Chuo Mitsui Trust and Banking.
The dollar firmed to around 119.42 yen in Asian morning trade, virtually unchanged from late Friday's New York levels. It was also little changed against the euro at around $1.1229. Traders said the Nikkei had yet to be the driving force for the currency market, given scepticism about the sustainability of its gains. "The Nikkei has to stabilise convincingly above 10,000. It has to at least close above that level," said a dealer at a Japanese bank. Yields on the benchmark 10-year Treasury note were virtually unchanged in Asian trade at 4.5484 from their close in New York on Friday. Spot gold slipped about a dollar to $362 in early Asian trade from its New York level on Friday, with the dollar's stronger trend making bullion more expensive to hold. //