Asia shares up, confidence in recovery grows

HONG KONG: Asian shares pushed higher for a second day on Wednesday, with Taiwan's benchmark index nearing a 16-month high, as growing confidence in a strengthening global recovery boosted resource and financial companies. Gold hit a record high on the spot and futures markets in Europe, with dollar weakness continuing to support sentiment by attracting fresh investment in the precious metal.

Spot gold prices scaled a new peak of 1,048.20 an ounce, while gold for December delivery on the U.S. COMEX futures market jumped to a shade below 1,050 before retreating a bit. U.S. crude oil prices rose about half a percent to above $71 levels, adding to gains scored the previous day as commodities surged on hopes that global demand was picking up. Australian miners and Japanese trading houses were among the big winners, with shares of Rio Tinto and Mitsubishi Corp both jumping more than 5 percent.

Some investors also took heart from Australia's central bank lifting interest rates the previous day, the first of any Group of 20 nation to do so in a sign that the emergency measures put in place to stem the financial crisis are gradually being unwound. The Australian dollar hit a 14-month high above $0.892 as investors bet on more rate rises later this year after the surprise quarter-point hike to 3.25 percent.

The rate increase was seen as a sign the global economy was on the mend and fueled gains of more than 1 percent on Wall Street, and a 2.3 percent jump in Australian shares. "The RBA set the cat amongst the pigeons by becoming the first G20 central bank to hike rates. The move likely accelerated the issue of yield re-emerging as a key currency driver the coming months," said analysts at Calyon in a note to clients. "The hike is unlikely, however, to be quickly followed by the U.S., Japan or Europe."

Some economists noted that Australia is a special case because its economy and banking system were mostly sheltered from the global crisis and has benefitted from China's aggressive efforts to stockpile resources and kick start growth. Many major central banks are unlikely to raise rates for some time, trying to ensure there is no dip back into recession. Federal Reserve officials remain cautious about unwinding emergency measures. Kansas City Fed President Thomas Hoenig said late on Tuesday that the U.S. economy is clearly recovering but that it is too soon for the Fed to withdraw its massive support.

The MSCI index of Asia-Pacific shares outside Japan rose about 1.4 percent, with the material sector the biggest gainer on the day. Japan's Nikkei average gained 1.2 percent, with financials getting a boost from a rise in U.S. counterparts the previous day after Goldman Sachs upgraded the sector. The banking sector rose 3.6 percent. Hong Kong stocks rose 2.1 percent to a two-week high, as higher commodity prices spurred resources shares, while banks rose on prospects that China may lift interest rates sooner than expected.