* MSCI Asia ex-Japan up 0.1 pct, Nikkei hits 53-month highs
* Yen falls to fresh lows against dollar on BOJ report
* China's Feb HSBC flash PMI retreats from 2-year peak
* European shares likely to climb
By Chikako Mogi
TOKYO, Feb 25 (Reuters) - Asian shares edged higher on
Monday but uncertainty facing the global economy capped prices
as a private survey showed Chinese manufacturing contracted this
month from two-year highs.
European markets are seen rising, with financial
spreadbetters predicting London's FTSE 100, Paris's
CAC-40 and Frankfurt's DAX would open as much
as 0.4 percent higher. U.S. stock futures were steady to
suggest a calm Wall Street start.
Investors remain wary of fragility in the global economic
recovery, having pushed markets broadly higher over the past few
months as pessimism over the euro zone's debt crisis and U.S.
budget woes receded.
But now markets are wondering whether Italy's weekend
elections will produce a stable government, and the implications
of that for euro zone cohesion, while Moody's credit downgrade
on Britain weighed on confidence in the pound.
Testimony on Tuesday from Fed Chairman Ben Bernanke may
offer for further clues of when the Fed intends to slow or stop
buying bonds: Financial markets were rattled last week by
minutes of the Fed's January meeting showing some Fed officials
were mulling scaling back its strong monetary stimulus earlier
"It's a waiting game at the moment, with the U.S. Fed
chief's testimony on Tuesday and the outcome of the elections in
Italy due to come. We're not sure if this is the bottom," said
Jackson Wong, Tanrich Securities' vice-president for equity
China's HSBC flash purchasing managers' index (PMI) for
February slipped to a four-month low of 50.4 from January's
final reading of 52.3, which had been the best performance since
January 2011. The flash PMI, however, did indicate a fourth
consecutive month of expansion, even though it just managed to
avoid the 50-mark separating expansion from contraction.
Hong Kong shares were up 0.1 percent and Shanghai
shares rose 0.5 percent, but the PMI news pared early
The MSCI's broadest index of Asia-Pacific shares outside
Japan was up 0.1 percent, pulled higher by
Australian shares which gained 0.8 percent on strong
financials and retail stocks.
South Korean shares bucked the trend and fell 0.5
percent, on news that an advocate of aggressive monetary easing
was poised to head the Bank of Japan pressured Korean carmakers.
The Nikkei newspaper reported the Japanese government is
likely to nominate Asian Development Bank President Haruhiko
Kuroda and Kikuo Iwata, both vocal advocates of aggressive
monetary expansion, as BOJ governor and deputy governor.
The Nikkei closed up 2.4 percent at a 53-month high
as the yen touched its lowest since May 2010 against the dollar
and five-year Japanese government bond yields hit a record low.
Prime Minister Shinzo Abe on Friday vowed to get the world's
third biggest economy growing again as he met with President
Barack Obama. The United States and Japan also agreed on
language during Abe's visit that could set the stage for Tokyo
to soon join negotiations on a U.S.-led regional free trade
agreement - the Trans-Pacific Partnership.
"The news of Kuroda (as BOJ nominee) appears to be taken
positively by the market, but I think signs of progress towards
TPP are vital as it shows Abe is taking leadership in pushing
structural reforms, with the TPP being a vital tool to boosting
growth," said Tetsuro Ii, the chief executive of Commons Asset
The prime minister's "Abenomics" policy of powerful monetary
and fiscal stimulus, with its consequent weakening of the yen,
has cheered investors who have pushed the Nikkei average up some
30 percent and the yen down 20 percent against the dollar over
the past three months.
The yen touched a low of 94.77 against the dollar,
while the euro rose to a high of 124.83 yen.
The dollar fell sharply to below 93 yen last week on media
reports that Toshiro Muto, a former financial bureaucrat
perceived as less willing to take unconventional steps, was the
frontrunner candidate for the top BOJ job.
"The dollar's move this morning is merely a rebound from
disappointment on Muto last week. I don't think this topic will
be enough to hoist the dollar above 95 yen," said Hiroshi Maeba,
head of FX trading Japan at UBS in Tokyo. "No matter who is
elected at the BOJ, it will not affect the longer-term trend of
a weak yen," he said.
Speculation over the BOJ has been a key factor driving the
yen lower recently due to expectations of strong reflationary
measures, but fundamental factors such as Japan's deteriorating
trade balances and signs of firmer U.S. growth also supported a
weakening yen trend.
In the U.S., with five days left before $85 billion is
slashed from U.S. government budgets, the White House warned
about the harm the cuts will do to Americans.
The euro firmed 0.1 percent to $1.3199, off Friday's
six-week low of $1.31445.
Sterling fell to a 31-month low of $1.5073 early on
Monday and a record low against the New Zealand dollar at
NZ$1.8025 following Friday's one-notch downgrade of
Britain's prized triple-A sovereign rating by Moody's.
Hedge funds and other big speculators cut their bullish bets
on U.S. commodities by the most in about 10 months in the week
to Feb. 19, just before oil and metals prices tumbled on rumours
a commodities hedge fund was dumping positions.
U.S. crude steadied at $93.12 a barrel and Brent
eased 0.1 percent to $114.