Asian stocks clambered off four-month lows on Tuesday after mostly upbeat corporate and economic news lifted U.S. shares, as investors braced for a Federal Reserve meeting that could signal an imminent rate rise. The dollar held steady ahead of the meeting, where the U.S. central bank is expected to take another step towards raising interest rates by changing its policy statement to acknowledge robust economic growth. Oil prices eased a touch, but were still near highs last seen shortly before the 2003 Iraq war. With Japanese markets closed for the second day of a three-day holiday, an MSCI index of shares elsewhere in the Asia Pacific <.MSCIAPJ> climbed 0.6 percent by 0200 GMT, reversing Monday's loss that took it to a four-month low. Shares in the world's third-biggest memory chip maker, South Korea's Hynix Semiconductor Inc <000660.KS>, surged almost 10 percent after Merrill Lynch raised its target price for the stock. The dollar held on to gains scored against the euro on Monday after a key manufacturing survey showed inflation pressures building in the economy. That fuelled the case for tighter monetary policy in the United States, although the overall report came in below expectations.
UBS strategist Ashley Davies expects the Fed to move its view on inflation risks to "neutral" and to drop the word "patient" when discussing interest rates, perhaps in favour of the word "measured" as employed in Fed Chairman Alan Greenspan's recent testimony. "This would give the Fed the leeway to tighten at its June 30 meeting if the data continues to be strong, but would also allow some scope for patience should the numbers be at all ambiguous," Davies said. The euro was trading at $1.1946 compared with $1.1932 in New York and a high on Monday of around $1.1980. The dollar was also buying 110.16 yen versus 110.26 in New York.
HONG KONG OPENS HIGHER
Asian shares took their cue from Wall Street, where shares rose on positive news from companies including Adobe Systems Inc and generally upbeat data on manufacturing, construction and the semiconductor industry. Hong Kong's Hang Seng Index <.HSI> opened 0.3 percent higher. Benchmarks elsewhere were up 0.4 percent in South Korea <.KS11> and Australia <.AXJO>, 0.5 percent in Singapore <.STI> and 0.7 percent in Taiwan <.TWII>. The Dow Jones industrial average <.DJI> climbed 0.9 percent and the Nasdaq Composite <.IXIC> added one percent. Asian shares battered recently by worries over slowing Chinese demand rebounded. South Korean steel maker POSCO Co <005490.KS> climbed four percent after losing 11.5 percent in the past five days. "The market fell too much last week and appears to have bottomed out near its 120-day moving average," said Lee Woo-hyun, an analyst at Kyobo Securities in South Korea. "But momentum is still too weak to see any sustained upward movement." In Australia, St George Bank gained 6.5 percent after exceeding market forecasts for its first-half profit and raising its full-year earnings outlook. But struggling slot machine maker Aristocrat Leisure shed 3.8 percent after telling its annual meeting it could not yet give a first-half or full-year outlook. U.S. oil fell 0.2 percent to $38.14 a barrel. Crude jumped on Monday towards a March peak last exceeded in February 2003, before the start of the U.S.-led invasion of Iraq. Security fears after an attack on a Saudi Arabian refinery overshadowed comments by OPEC ministers saying the cartel could maintain or even raise its third-quarter quotas. Gold was steady at $387 an ounce.//