Asian stocks rebound after Wall St rise

Asian stocks rose on Tuesday, snapping two straight sessions of declines after upbeat earnings from Apple (AAPL.O: Quote, Profile, Research) helped power some technology shares higher, while the yen's rally paused as risk appetite resurfaced. This took the shine off safe-haven government bonds, driving the benchmark 10-year Japanese yield off a one-month low.

But lingering worries about the full impact of the U.S. housing slump on the world's biggest economy and credit market troubles were expected to limit the upside for stocks.

At 0218 GMT, MSCI's measure of Asia Pacific stocks excluding Japan had risen 1.4 percent, climbing after two consecutive sessions of falls, while Tokyo's Nikkei average (.N225: Quote, Profile, Research) edged up 0.3 percent.

On Monday, the MSCI index dropped 3.1 percent, posting its biggest one-day decline in just over two months.

"It's too early to say whether the market has already seen the bottom," said Lee Woo-hyun, a market analyst at Kyobo Securities in Seoul.

"We've high oil prices on one hand and a slowing U.S. economy on the other hand. The Federal Reserve will need to cut interest rates to prevent a recession, but that won't be easy when oil prices are hovering around $90 per barrel."

After peaking at a record high above $90 on Friday, U.S. crude was trading at $85.79 a barrel as investors worried about slower U.S. economic growth denting demand.

TECHS, BANKS IN FAVOUR

Investors bought firms such as electronics parts maker Hon Hai Precisions Industry (2317.TW: Quote, Profile, Research), which makes iPods for Apple, and contract laptop PC maker Quanta Computer (2382.TW: Quote, Profile, Research), which supplies Apple, sending their shares up 1.7 percent and 4.3 percent respectively.

"Apple's result helped ease the sell-off on Wall Street... and the stronger forecast that Apple gave bodes well for its Taiwan contract manufacturers," said Sheng Yen, a fund manger of Franklin Templeton First Taiwan.

Banks, hammered by credit worries, were also better bid following the rebound in their U.S. peers. Australia's Macquarie Bank (MBL.AX: Quote, Profile, Research), Japan's Mitsubishi UFJ (8306.T: Quote, Profile, Research) and Singapore's DBS (DBSM.SI: Quote, Profile, Research) all rose.

China Mobile (0941.HK: Quote, Profile, Research) jumped 3.9 percent a day after reporting a forecast-beating quarterly profit, but BHP Billiton (BHP.AX: Quote, Profile, Research) sagged 1.1 percent after the world's biggest miner posted a 10 percent fall in copper production, its top revenue earner, from the previous quarter.

YEN PAUSES

Gains in stocks lifted appetite for riskier assets, which in turn weighed on the low-yielding yen -- the currency of choice when funding purchases of higher yielding and riskier assets in the popular carry trades.

The dollar bounced up to 114.47 yen from an intraday low near 113.20 yen on Monday, while the euro climbed to 162.43 yen from the previous session's low of about 160.50 yen.

"Since U.S. shares rose, that led to some short-covering in cross/yen," said a dealer at a major Japanese trading house.

Against the dollar, the single European currency edged up towards $1.42 after falling from the record high near $1.4350 at the start of the week.

Selling in the dollar had picked up pace on Monday in Asia after the Group of Seven finance ministers and central bankers at a weekend meeting made no specific mention of the currency's recent weakness.

Meanwhile, gold inched up to $757 an ounce to be within sight of a 28-year peak of $770 an ounce touched on Friday, after also sliding in the previous session.

Japanese government bonds retreated in the face of rising stock markets. The yield on the benchmark 10-year bond climbed 0.5 basis point to 1.58 percent, off a one-month low of 1.555 percent plumbed on Monday.

Still, expectations that the Federal Reserve will cut interest rates at next week's policy meeting meant that yields were likely to be capped.

"Few investors want to sell JGBs at the moment," said Takafumi Yamawaki, fixed-income strategist at Morgan Stanley.