The overnight momentum carried over into Friday and at 0130 GMT the MSCI All-Country World equity index .MIWD00000PUS was up nearly half a percent at 464.05 after hitting a one-month low earlier in the week.

Shares in Shanghai .SSEC and South Korea .KS11 rose and Japan’s Nikkei average climbed more than 1 percent to a five-month high above 10,000, propelled by buying by overseas hedge funds and a fall in the yen, which makes exporters look more attractive.

Blue-chip shares rose broadly. Banking shares were likely buoyed by short-covering and fresh buying by a U.S. brokerage on the view that they are undervalued, one market player said.

The charts also point to stronger upside potential after the Nikkei on Thursday broke through solid resistance at its 200-day moving average for the first time since May. The next target looms around its June high of 10,251.90.

“Many hedge funds close books in November and now is a time when short-covering tends to emerge. Solid U.S. economic data and GM’s listing yesterday are also lending help,” said Hiroaki Kuramochi, chief equity marketing officer at Tokai Tokyo Securities.

The Nikkei rose earlier as much as 1.2 percent to 10,130.23, its highest level since June 22.

The euro edged up 0.11 percent to $1.3627, supported by rising expectations of a financial rescue plan for Ireland.

The dollar .DXY held steady against a basket of currencies and against the yen..

News that Ireland may avert a debt crisis weighed on bonds. The benchmark 10-year U.S. Treasury note fell 5/32 in price to lift yields to 2.90 percent.

U.S. crude oil futures gained nearly 50 cents to $82.11 per barrel, retracing part of a four-session drop, while spot gold was up $6.20 to $1,359.65 an ounce.

GM WOWS WALL STREET; IRISH EYES SMILING

Global stocks rose on Thursday as a blockbuster General Motors Co (GM.N: Quote, Profile, Research, Stock Buzz) stock offering dovetailed with upbeat U.S. economic data and easing Irish debt tensions.

GM’s return to the market less than 18 months after it emerged from bankruptcy, raised $20.1 billion, the largest U.S. initial public offering.

Manufacturing activity in the U.S. Mid-Atlantic region grew much more than expected, a survey from the Philadelphia Federal Reserve Bank showed. An improvement in weekly initial claims for U.S. jobless benefits helped boost the dollar.

The U.S. data helped erode some of the euro’s gains as uncertainty about the Irish crisis ebbed after Dublin agreed to work with a European Union-International Monetary Fund mission on steps to shore up its battered banking sector.

But analysts are skeptical any rebound in risk appetite can be sustained when fiscal problems are still severe in Ireland and other peripheral euro-zone countries such as Portugal and many investors are inclined to cut risk exposure before the year-end.

“It’s absolutely vital for the authorities to take pro-active steps in order to try to resolve this crisis as soon as possible. The market should see some relief in relation to that,” said Henk Potts, equity strategist at Barclays Wealth.

The Dow Jones industrial average .DJI rose 1.57 percent on Thursday. The Standard & Poor’s 500 Index .SPX gained 1.54 percent and the Nasdaq Composite Index .IXIC added 1.55 percent.

The pan-European FTSEurofirst 300 index .FTEU3 of top shares climbed 1.43 percent.

(Additional reporting by Aiko Hayashi, Daniel Bases, Angela Moon, Jessica Mortimer and Joanne Frearson; Editing by Neil Fullick)

Obama arrives in Indonesia, fresh from a mauling at mid-term polls that has diminished his stature at home and abroad, and just as strategic rival China is trying to play an increasingly assertive role in the region.

But China may have been overplaying its hand — and that gives Obama an opportunity.

Beijing’s hawkish behavior over maritime disputes involving several Asian nations has concerned Indonesia and other countries in the Association of South East Asian Nations (ASEAN) and they are looking to Washington to act as a balancing force that helps them protect their interests and steer an independent course.

“Gloating references to the decline of American power and the coming demise of American influence were the daily staple of the Asian intelligentsia and media until recently,” wrote Anindya Bakrie, a businessman and son of leading Indonesian political powerbroker Aburizal Bakrie, in the Jakarta Post newspaper.

“Then came the South China Sea dispute and the Asian mood soured considerably. ASEAN nations turned to Washington for help in facing what they saw as an increasingly assertive and intransigent Beijing.”

So while Washington may have squandered some of its goodwill, it still may be able to bolster its regional influence.

“The United States’ lack of interest in Southeast Asia during much of the 2000s, though that is changing, opened the door for China,” said Joshua Kurlantzick, senior fellow for southeast Asia at the Council on Foreign Relations.

“But China has done itself some damage in the region, and also in Indonesia, by taking a more aggressive public posture over the past year on a lot of issues, like the South China Sea.”

Most Indonesians rejoiced when Obama was elected president two years ago — the world’s largest Muslim country saw him as a leader who not only could repair ties with the Islamic world but who also had a special understanding of a country he lived in as a boy. But the honeymoon is definitely over.

“Obama is weakened at home, and is weakened in the world now,” said Wimar Witoelar, a veteran political commentator and former Indonesian presidential spokesman.

“Excitement here has long gone over his visit. But one must not misunderstand — support is still here.”

Obama has twice canceled previous planned visits. Even his latest trip — he is scheduled to arrive on Tuesday for a 24-hour visit — is in some doubt because of concerns over volcanic ash from repeated eruptions of Indonesia’s Mount Merapi.

INDONESIA’S IMPORTANCE ON THE RISE

Indonesia’s importance as an ally of the United States is rising. A decade ago, Washington’s primary interest was securing Jakarta’s cooperation in crushing Muslim militant groups in the region loyal to al Qaeda. That effort has been a success — while the militant threat still exists, it is greatly diminished.

But now Indonesia’s growing economic and geopolitical clout make it the key player in Southeast Asia.

Regarded as the region’s basket case until recently, Indonesia is now seen as joining the “BRIC” bloc of emerging economic powerhouses Brazil, Russia, India and China, and hopes to attain an investment grade sovereign rating before long.

With authoritarianism on the rise in Thailand, Indonesia also stands out as the torchbearer for democracy in Southeast Asia.

“We see in Indonesia the intersection of a lot of key American interests and we see this as a partnership that is very important to the future of American interests in Asia and the world,” said U.S. deputy national security advisor Ben Rhodes.

Obama will announce increased aid for education and seek to deepen relationships on economic and security issues.

Obama and Indonesian President Susilo Bambang Yudhoyono — who like his U.S. counterpart faces waning popularity after an initial tide of enthusiasm — are expected to sign the “Comprehensive Partnership” pact they agreed a year ago.

“The partnership includes major initiatives in trade and investment, maritime security, counterterrorism, higher education, and climate change cooperation, and effectively enhances ties with Indonesia to a substantively new level,” said Ernest Bower, director of the Southeast Asia Program at the Center for Strategic and International Studies in Washington.

Obama’s visit will resonate far beyond Indonesia.

Other Southeast Asian nations worried about China will be watching to see if the United States provides the support they want as a bulwark against Beijing.

And a speech he is scheduled to give at Jakarta’s Istiqlal Mosque is a chance to repair ties with the Muslim world, damaged by the failure to shut Guantanamo Bay and the war in Afghanistan.

In 2009 in a major speech in Cairo he called for a “new beginning” in relations with Islam. Indonesia and the wider Muslim world are still waiting to see that new beginning, but Obama’s visit to Jakarta gives him another chance to restore their faith.

(Additional reporting by Sunanda Creagh and Chris White in Jakarta, and Alister Bull traveling with Obama; Writing by Andrew Marshall; Editing by Miral Fahmy)

White House officials said they were watching developments “very closely”, but there were no plans for now to reschedule a visit that has already twice been postponed.

The volcano, on the outskirts of Yogyakarta city in central Java, began spewing lava, superheated gas and deadly clouds of ash two weeks ago and has so far killed over 120 people and forced the evacuation of more than 200,000.

Local TV stations showed search and rescue teams trekking through the undergrowth, thick with ghostly white ash, frequently having to turn and flee when threatened with fresh eruptions or waves of pyroclastic flow — a dense, fog-like phenomenon that can kill, burn or choke anything in its path.

While the volcano is around 600 kms (400 miles) east of the capital, Jakarta, and authorities there said it had no impact on flying conditions, many international airlines cancelled or reduced services to the country’s main Sukarno-Hatta airport.

“Several foreign airlines have cancelled flights, but actually the impact of Merapi is not disturbing air traffic (in Jakarta),” said Sutopo Purwo Nugroho, the director of disaster risk reduction at the National Disaster Mitigation Agency:

Rain forecast for the area would likely help smother the ash and bring it to down to earth in the form of “hard rain”, officials said.

“We are following the developments very carefully,” said Ben Rhodes, White House deputy national security advisor, in Mumbai, India, where Obama is on the first leg of a 10-day Asia tour.

Several flights to Jakarta were cancelled on Saturday, by carriers including Singapore Airlines, Lufthansa, Turkish Airlines, AirAsia and Tiger. But on Sunday most flights went ahead as scheduled.

“Presently, only four flights to Jakarta have been cancelled. Also cancelled are one flight each to Bandung and Yogjakarta,” said a spokesman for Changi Airport in Singapore.

“We continue to monitor the situation but the decision to fly rests with the airlines.”

UNEVENTFUL FLIGHT

A Reuters correspondent aboard a Malaysia Airlines flight from Kuala Lumpur that landed around midday said it had been uneventful.

A British Airways flight came close to crashing nearly three decades ago after its engines sucked in ash from another Indonesian Volcano, Mount Galunggung, about 180 kms (110 miles) south east of Jakarta.

Obama has twice postponed visits to Indonesia — where he lived for several years as a child with his mother — the first time in March as he struggled to push through a health reform bill in the U.S. and the second in June following the BP oil spill in the Gulf of Mexico.

Indonesia’s President Susilo Bambang Yudhoyono visited Yogyakarta to show solidarity with those affected. Local newspapers showed pictures of him with his wife and other officials, wearing masks against the ash, which is now so thick that motorists drive with their headlights on during the day.

“There is no sign Merapi is abating,” Yudhoyono said.

Officials on Saturday extended the evacuation zone to 20 kms (12 miles) from Merapi’s summit, deploying 2,500 troops and 1,500 police to help manage the evacuation.

Indonesia is also struggling with the aftermath of a tsunami in the remote Mentawai islands off Sumatra last week that killed at least 445 people.

(Additional reporting by Telly Nathalia and Niluksi Koswanage in JAKARTA and Alister Bull in MUMBAI; Editing by Andrew Marshall)

European stock markets followed Asia lower in early trade,
with the FTSEurofirst 300 .FTEU3 index of leading stocks
sliding 0.7 percent. S&P 500 futures SPc1 were down 0.7
percent, pointing to a weaker opening on Wall Street.

The Wall Street Journal said on Wednesday that the Federal
Reserve would probably unveil a programme of U.S. Treasury bond
purchases worth “a few hundred billion dollars”, but gave no
source for the report. [ID:nTOE69Q02H]

Most currency dealers had expected a Fed policy meeting
next week to opt for more quantitative easing — essentially
printing money to buy assets and pull market rates lower — but
some believe the dollar already reflects those expectations and
the question of how much easing, and how fast, has kept them
edgy.

The dollar index against a basket of major currencies
.DXY, rose 0.5 percent. The euro was down nearly half a
percent on the day at $1.3798 EUR=, while the dollar was up
0.41 percent at 81.73 yen JPY=.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

For a preview of the Fed meeting and possible outcomes,
see
[ID:nN25168493]

For more on the G20 meeting, click [ID:nTOE69K01G]

Will Japan intervene again? click [ID:nTOE69P01U]

G20′s truce on currencies r.reuters.com/nan99p
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

In a Reuters survey earlier this month, U.S. primary
dealers’ projections for the size of the Fed’s expected
quantitative easing had ranged from $500 billion to $1.5
trillion. [FED/R]

“The market has had in mind a figure of $1 trillion or more
and we had been in a situation where that had led to dollar
weakness,” said Masafumi Yamamoto, chief FX strategist Japan
for Barclays Capital. [ID:nTOE69Q041]

Analysts at Bank of America-Merrill Lynch wrote in a client
note that the prevailing market belief was that QE was now
close to being fully priced in and anything short of $500
billion in announced purchases over a six-month horizon could
disappoint and cause interest rates to rise.

A top concern of policymakers in Asia is that any
additional easing by the Fed will send more speculative “hot
money” into emerging economies, pushing up their currencies to
the point where exports are less competitive and threatening
regional economic growth.

Singapore’s central bank warned on Wednesday of the risk of
a disorderly reverse of such capital inflows if inflation was
not contained. Indian and South Korean officials also expressed
concerns about the impact of the recent flood of inflows.
[ID:nSGC003812]

The Korean won led a selection of emerging Asian currencies
lower against the dollar, dipping 0.7 percent to 1,128.95 per
dollar by 0630 GMT.

The MSCI index of Asia Pacific stocks outside Japan fell
1.8 percent .MIAPJ0000PUS, on track for the biggest daily
decline since August, while the MSCI’s emerging market stock
benchmark .MSCIEF was down 1.1 percentas of 0730 GMT.

Japan’s Nikkei .N225 ended marginally higher. [.T]

COMMODITIES SAG AS DOLLAR BOUNCES

The rebounding dollar has caused some investors to bail out
of commodity stocks, pulling down the MSCI Asia ex-Japan
commodity sector index as raw materials prices slid.

Hong Kong’s benchmark Hang Seng Index .HSI was down 1.7
percent, with the China Enterprises Index .HSCE of top
locally listed mainland Chinese companies 2.7 percent lower.

Overnight, the Dow Jones industrial average .DJI and the
Standard & Poor’s 500 Index .SPX were little changed while
the Nasdaq Composite Index .IXIC gained 0.3 percent. [.N]

Spot gold XAU= edged down 0.56 percent to $1,331.25 an
ounce, while crude oil CLc1 fell 0.54 percent to $82.01 per
barrel.

Copper traded on the London Metal Exchange was down 1
percent to $8,424 a tonne CMCU3, essentially giving back the
week’s gains before Wednesday.
(Additional reporting by Wayne Cole in SYDNEY and Manuela
Badawy in NEW YORK and Charlotte Cooper in TOKYO; Editing by
Kim Coghill)
(david.fox@thomsonreuters.com; +852 28431649; Reuters
Messaging: david.fox.reuters.com@reuters.net)

Most currency dealers expect the Fed to opt for more quantitative easing at a policy meeting next week– essentially printing money to buy assets and pull market rates lower — but some believe the weakening dollar already reflects those expectations, and the question of how much easing, and how fast, has kept investors edgy.

The Wall Street Journal said on Wednesday the Federal Reserve would probably unveil a program of U.S. Treasury bond purchases worth “a few hundred billion dollars,” but gave no source for the report.

The euro was down 0.23 percent on the day at $1.3826 after touching $1.3858 overnight, while the dollar was up 0.2 percent at 81.58 yen. The dollar index, a measure of its performance against a basket of currencies, was up 0.07 percent.

The Fed meets on November 2-3, but some investors have begun to reconsider the likelihood of a big burst of QE after comments from various members of the central bank.

The U.S. currency rose broadly on Tuesday as investors speculated the Federal Reserve would proceed more cautiously in announcing any asset-buying, scaling back bets against the greenback.

“I think it’s still possible that QE II is not a done deal for November, even though the market has been trading as if it is,” said Brian Dolan, chief currency strategist at Forex.com.

AUSSIE CPI SURPRISE

New data from Australia showed consumer prices there rose by less than expected in the last quarter while the annual pace of core inflation was the slowest in five years — greatly lessening the urgency for a hike in interest rates next week.

The key trimmed mean measure of underlying inflation favored by analysts rose 0.6 percent in the quarter and 2.5 percent for the year, seemingly justifying the RBA’s decision to skip a rise in its 4.5 percent cash rate this month and give it room to pause ahead of the U.S. Federal Reserve meeting.

The market now implies around a 29 percent chance of a hike next week — down from 60 percent earlier in the day — and just 37 basis points of tightening over the next 12 months compared to 57 basis points before the data.

ASIAN STOCKS FLAT TO LOWER

The MSCI index of Asia Pacific stocks outside Japan slipped 0.46 percent .MIAPJ0000PUS while the MSCI’s emerging market stock benchmark .MSCIEF was down 0.23 percent at 0130.

The rebounding dollar has caused some investors to bail from commodity stocks, pulling down the MSCI Asia ex-Japan commodity sector index 1.2 percent on the day.

U.S. stocks ended little changed before the potential market tumult of next week’s U.S. elections and likely announcement of more stimulus from the Fed.

Next week’s high-profile events could signal shifts in both monetary policy and legislative direction, raising fears that trumped Tuesday’s earnings news and economic reports.

Overnight, the Dow Jones industrial average .DJI gained 0.05 percent, while the Standard & Poor’s 500 Index .SPX gained 0.02 point to 1,185.64. The Nasdaq Composite Index .IXIC gained or 0.26 percent.

The pan-European FTSEurofirst 300 .FTEU3 index of top shares closed down 0.2 percent, after rising 0.3 percent on Monday to end near a six-month high.

Spot gold edged up 0.4 percent to $1,343.45 an ounce, while U.S. gold futures edged up $5 to $1,343.4 an ounce. Crude oil fell 0.23 percent to $82.32 per barrel.

(Additional reporting by Wayne Cole in SYDNEY and Manuela Badawy in NEW YORK and Charlotte Cooper in TOKYO; Editing by Nick Macfie)

After no major policy initiatives emerged from a Group of 20 finance ministers meeting over the weekend, investors had kept selling the dollar on expectations that further asset-buying from the Fed will lead to debasement of the U.S. currency.

However, Fed officials have not been uniform in their comments about “QE2,” leading to some doubts in markets about how big such a program will be. Kansas City Fed President Thomas Hoenig even called more asset buys by the central bank a “very dangerous gamble.

Expectations of more cheap money flooding the financial system have been pushing up global equity and commodity prices.

The euro was down 0.2 percent on the day at $1.3940 after rising as high as $1.4080 overnight.

The dollar was largely unchanged at 80.80 yen, very close to a 15-year low of around 80.41 yen and not far from a record low of 79.75 yen.

Japan’s finance minister, Yoshihiko Noda, was due to hold a news conference that will be closely watched for warnings of intervention after the dollar hit 15-year lows against the yen on Monday. One trader said a fall in the dollar to below 79.75 yen could be the catalyst for further intervention.

Markets increasingly believe G20 signals against competitive devaluation will make it tough for Tokyo to intervene, and verbal warnings alone are unlikely to keep the yen from breaking above record high.

G20 finance ministers pledged at the weekend to move toward market-determined exchange rates and commit to a variety of policies to reduce excessive external imbalances.

The MSCI index of Asia Pacific stocks outside Japan slipped 0.3 percent .MIAPJ0000PUS but remained close to a 28-month high hit last week.

The MSCI’s emerging market stock benchmark .MSCIEF was up 0.12 percent at 0200 GMT, while the dollar held up 0.01 percent against a basket of currencies .DXY.

A slew of earnings due shortly has helped keep focus on Asian stocks, but the Singapore stock exchange’s (SGXL.SI: Quote, Profile, Research, Stock Buzz) $8.3 billion takeover of Australia’s ASX Ltd (ASX.AX: Quote, Profile, Research, Stock Buzz) faced a hurdle after key political leaders voiced concern over the deal and hinted they may oppose it in parliament.

SGX stock was down 2.4 percent after falling 6.2 percent on Monday.

Australia’s Greens Party, which holds the balance of power in the upper house Senate, said it had strong concerns about the deal and may not support lifting the ASX’s 15 percent ownership cap.

For most investors, the Fed meeting next week was a potential source of volatility.

JPMorgan Asset Management warned its clients not to become too carried away with the prospect of quantitative easing, the Fed’s expected assets purchases.

“Strong asset price gains were seen as one of the primary objectives of QE, with the central bank reportedly keen to boost household wealth and to prompt risk appetite within the economy,” it said.

“As a result, strong gains ahead of the FOMC arguably reduce the need for QE and thus increase the chances of disappointment when the Fed finally announces the outcome of its deliberations.”

Elsewhere, U.S. light sweet crude oil was up 0.34 percent, to $82.23 per barrel while gold was up 0.13 percent.

(Editing by Sugita Katyal)