* MSCI Asia ex-Japan rises 1.8 pct, Nikkei jumps 3 pct
* Fears of Fed stimulus withdrawal, China crunch ease
* China money market rates dip further, still elevated
* Precious metals rebound, oil extends gains
* European shares likely rise
By Chikako Mogi
TOKYO, June 27 (Reuters) - Asian shares extended gains for a
second day on Thursday, buoyed by hopes that the U.S. Federal
Reserve will not rush to end its stimulus programme, and by
further signs that stresses in China's banking system are
European stocks were also seen crawling higher, with
financial spreadbetters predicting London's FTSE 100,
Paris's CAC-40 and Frankfurt's DAX would open
up as much as 0.4 percent.
A 0.1 percent rise in U.S. stock futures also
suggested a firm Wall Street open.
"The recent sell-off seems to have found a bottom and some
bruised bulls are dusting themselves off and going on the hunt
for some quite heavily discounted bargains," Jonathan Sudaria, a
trader with Capital Spreads, said in a note to clients.
MSCI's broadest index of Asia-Pacific shares outside Japan
rose 1.8 percent, adding to Wednesday's 1.9
percent climb which broke a four-day losing streak and pushed
the index away from an 11-month low touched earlier in the week.
The index has wiped out this week's steep losses and escaped
from extremely bearish territory, but its relative strength
index (RSI) remained near oversold levels, with investors still
shell-shocked after a month-long emerging markets slide.
The market tone improved overnight after a surprisingly
sharp downward revision to first-quarter U.S. economic growth
calmed fears that the Fed would soon wind down the massive
bond-buying scheme that has underpinned investors' risk
Steadying Chinese markets also helped calm emerging market
currencies and stocks, though trading in Shanghai was still
Chinese money market rates moderated for a fifth day on
Thursday after last week's spike and stocks recovered some of
their recent hefty losses as fears of a credit crunch eased.
Hong Kong shares rose 1.1 percent after touching a
one-week high on better-than-expected China industrial profits
Shanghai shares rose as much as 1.2 percent as fears
of a credit crunch receded, boosting financials. But confidence
remained fragile, with major benchmarks surrendering their gains
before the close and dipping into the red.
"It's just bargain-hunting. There are still lots of
uncertainties ahead," said Ben Kwong, KSI Asia Ltd's chief
operating officer in Hong Kong, adding that he expected the Hang
Seng to seesaw between 20,000 and 21,000 points in coming weeks.
"The market will still have quite of lot of volatility in
the third quarter," he said.
Japan's Nikkei stock average, which was pulled down on
Wednesday by losses in Chinese shares, soared 3 percent, its
biggest one-day percentage gain in 13 sessions.
Seoul shares extended gains to shoot up 3 percent
before ending up 2.87 percent, as foreign investors turned net
buyers and snapped 14 straight sessions of selling.
CHINA ISSUE CONTAINABLE
With growing confidence in risk assets, Asian credit markets
rallied, tightening the spread on the iTraxx Asia ex-Japan
investment-grade index by 11 basis points.
The People's Bank of China did not drain any cash from the
open market on Thursday. While short-term borrowing rates eased,
they remained elevated, but traders said the credit crunch panic
that gripped the market last week had subsided.
Volatility was amplified this week by fears that a crisis in
China's banking system would undermine growth in the world's
second-largest economy and offset the benefits of a stronger
Chinese markets regained some stability after the central
bank earlier this week moved to quell concerns, saying it had
provided funds to some institutions and will do so again if
Yet, it remained commited to cracking down on risky informal
lending, pointing to tougher conditions for the banking sector
ahead and likely more bouts of nerves in Asian markets.
"There is a risk that squeezed credit could lead to 'shadow
banks' failing, destabilising China's financial system and
undermining growth, raising downside risks globally -
particularly for countries with a high reliance on the Chinese
economy," said Takao Hattori, senior investment strategist at
Mitsubishi UFJ Morgan Stanley Securities in Tokyo.
Fears of reduced availability of external funding,
triggered by the Fed's plan announced last week to eventually
cut its stimulus campaign, sent the Indian rupee to an
all-time low of 60.76 on Wednesday, driving home the
vulnerability of countries with limited reserves and high
current account deficits. The rupee was at 60.54 on Thursday.
Worries about China and the prospect of an eventual end to
the Fed's quantitative easing were likely to support the dollar,
often seen as a safe haven in times of market turmoil.
The dollar eased 0.17 percent this session against a basket
of major currencies after reaching a near one-month high
of 83.025 on Wednesday. It rose 0.3 percent against the yen to
U.S. Treasuries prices ended higher on Wednesday on weaker
than expected GDP, but a five-year Treasury note auction drew
the lowest demand since September 2009, revealing persistent
jitters over the Fed's future policy course.
U.S. crude futures rose 0.4 percent to $95.85 a
barrel and Brent added 0.5 percent to $102.19.
Spot gold surged 1.6 percent to $1,244.50 an ounce
after a 4 percent tumble on Wednesday which brought prices to
near three-year lows of $1,221.80 an ounce. Gold was last
trading up 1.2 percent to $1,239.70. Gold was seen pressured by
the dollar's bullish outlook.