Asian markets up ahead of ECB bank lending move

HONG KONG, February 29, 2012 (AFP) - Asian markets extended their gains Wednesday on optimism ahead of another ECB refinancing operation while US stocks provided a strong cue after closing at a near four-year high.

The euro strengthened on expectations of a strong take-up of the European Central Bank's offer of cheap cash to under-pressure lenders, while oil prices were supported by ongoing concerns over Iran.

Tokyo jumped 1.27 percent by the break, Hong Kong gained 0.54 percent, Sydney was 1.26 percent higher and Seoul added 1.44 percent but Shanghai slipped 0.29 percent.

The ECB will on Wednesday hold its second lending operation aimed at averting a credit crunch in the euro area by providing much-needed cash to banks at a rock-bottom rate of one percent for three years.

At the first long-term refinancing operation (LTRO) -- dubbed "Big Bertha" by ECB chief Mario Draghi -- in December, 523 banks lined up to borrow a record 489.2 billion euros.

According to Draghi the amount borrowed in the next operation could be close to that level.

Chris Gore, analyst at GO Markets in Melbourne, warned in a note that the refinancing could be a double-edged sword.

"Any significant deviation to the upside (would) likely help risk sentiment, although it should be noted an extremely high take-up of the ECB loans may also serve to highlight just how reliant banks are on ECB funding," he said, according to Dow Jones Newswires.

A Japanese trust bank trader said the common currency may rally if the loan amount is larger than expected.

Such an influx of liquidity can encourage investors to turn toward assets deemed riskier, such as the euro, and away from currencies currently seen as safe havens, such as the dollar and yen.

The euro fetched $1.3472 and 108.61 yen in Tokyo morning trade, compared with $1.3466 and 108.34 in New York late Tuesday.

The dollar firmed to 80.63 yen from 80.45 yen.

Asian traders were given a firm lead from Wall Street after the Dow ended at its highest level since before the global financial crisis kicked in.

With upbeat consumer sentiment data lifting spirits the Dow continued its recent rally to end at 13,005.12, its best finish since May 19, 2008.

Adding to broad regional confidence was news that Japanese industrial production in January rose by a bigger-than-expected 2.0 percent from the previous month as companies stepped up output of cars and electronic products.

The rise beat average market expectations of around 1.5 percent growth and followed a revised month-on-month rise of 3.8 percent in December.

And in South Korea output unexpectedly increased by 3.3 percent last month from December, easing concerns of a sharp slowdown in the export-dependent nation. Analysts had predicted a 1.2 percent fall, according to a Dow Jones Newswires poll.

On oil markets prices advanced as concerns over Tehran's nuclear programme crept back into the market

Israeli Prime Minister Benjamin Netanyahu Tuesday said a nuclear-armed Iran would control the major Gulf oil producers, send energy prices soaring, and "choke" the global economy.

New York's main contract, West Texas Intermediate crude for delivery in April, gained four cents to $106.59 per barrel and Brent North Sea crude for April settlement was up 23 cents at $121.78.

Western countries have imposed a raft of sanctions on Iran in a bid to halt its nuclear programme, which they say masks a bid to build atomic weapons, a claim Tehran denies.

Iran has said it will close the Strait of Hormuz -- a key transit route for global oil supplies -- if increased Western sanctions halt Iranian oil exports.

Gold was at $1,786.30 an ounce at 0300 GMT, compared with $1,776.70 on Tuesday.

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