GLOBAL MARKETS-Asia stocks head for biggest weekly rise in 3 mths

* Euro rallies after the ECB signals an April rate hike

* U.S. payrolls data may beat estimates

* Treasuries fall, gold slips as safe haven demand tarnished

By Saikat Chatterjee

HONG KONG, March 4 (Reuters) – Asian stocks are heading for
their biggest weekly gain in three months on bargain-hunting
after their recent drop while the euro perked up after the
central bank signalled a rate hike as early as next month.

Friday’s gains brought stocks to near levels since the
Libyan crisis erupted, indicating markets have been largely
resilient to oil’s near 15 percent surge in the past two weeks.

A reasonably strong correlation between Asian equities and
oil shows both track the broad growth story except for periods
when markets have grown nervous of a price shock because of the
resulting spillover impact on inflation and growth.

The region is a big importer of oil.

But the pull-back in Brent crude prices from 2-1/2
year highs after a key technical indicator rose to its most
overbought level in more than five years, eased oil worries for
the region.

Hopes that U.S. jobs data due later may show strong gains
and reinforce expectations of a steady improvement in the
world’s biggest economy boosted stocks across the region with
Tokyo and Seoul ending up more than a percent

Further gains on Wall Street appear difficult with the S&P
500 set to run into strong resistance around the 1,340-60
zone. The index ended up 1.72 percent at 1,330.97 points.

The broader MSCI index of Asia-ex Japan stocks
rose more than 1 percent with buying scattered
across financials, industrials and materials.

For the week, it is up nearly 3 percent, heading for its its
biggest weekly rise since early December.

Story on European Central Bank rate decision:

Brent’s Relative Strength Index:

Asia equities and oil correlations:

The median estimate is for a gain of 185,000 jobs, according
to economists polled by Reuters, but market sentiment was
leaning toward a number above 200,000, traders said.

Notwithstanding the Libyan crisis, Asian markets have
generally underperformed this year as inflows into emerging
market funds have slowed sharply due to concerns of inflation
and crowded positioning in some of the region’s markets.

But the latest oil driven sell-off has cleaned up some of
the technical positioning and enhanced the attractiveness of
certain markets such as Korea, according to Barclays Capital

Foreign investors were net buyers for a second
straight day in the stock market, the strongest since January.

“The return of foreign investors has given the market
significant support. However, buying appears to be
short-covering to close short position for now,” said Kwak
Joong-bo, a market analyst at Samsung Securities.

In credit, the benchmark for non-Japan Asia, the iTraxx
investment grade index saw its spreads tighten by 3
bps to 105/107, reflecting the broader demand for risky assets.


Gains in stocks diminished the safe-haven appeal for gold
and U.S. Treasuries with two-year debt yields rising
by as much as eight basis points to 0.77 percent.

In currency markets, the euro paused after a sharp
rally overnight after the European Central bank signalled an
interest rate hike as early as April.

The single currency jumped to a near four-month highs of
$1.3976 and last traded at $1.3961. Against the yen, the euro
hit four-month highs at 115.17 and last stood at

“We see scope for rates to go up significantly further this
year, beyond the hike now widely expected in April,” said
Kenneth Wattret, analyst at BNP Paribas.

The pull back in oil and hawkish rhetoric from the ECB
forced spot gold to snap a four-day rally. Silver
fell more than a percent.

Asian currencies were generally higher after the Beijing set
a record high mid-point for the second day indicating
authorities were using the yuan to help fight high
(Editing by Ramya Venugopal; Additional reporting by Ayai
Tomisawa in TOKYO, Jonathan Rogers at IFR, Krishna Kumar and Ian
Chua in SYDNEY)

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