Asian markets mostly up but Chinese fears cap rise

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Asian markets were mostly higher on Monday following a positive lead from Wall Street and bargain hunting after last week's losses but gains were capped by lingering concerns over China's economy.

Tokyo was 0.20 per cent higher by the break and Sydney added 0.18 per cent while Hong Kong was 0.16 per cent higher and Shanghai was flat while Seoul fell 0.46 per cent.

Traders were given few leads save Friday's positive close on Wall Street, where the Dow Jones index capped a three-session losing streak despite weak US housing data.

"Risk sentiment starts the week in positive mode," Credit Agricole said in a note to clients, according to Dow Jones Newswires.

However, it added that end-of-the-quarter 'window-dressing', or book balancing, had also played a part in selling pressure, while warning "there are still plenty of factors to dent risk appetite over coming days, not least of which is the gyrations in oil prices."

Regional markets were hit last week by a combination of poor data from China indicating a slowdown in the world's number two economy, weaker-than-forecast US housing figures and a bout of profit-taking after a strong rally at the start of 2012.

Among the big gainers of the day was Australia's Qantas, which rose 2.6 per cent after it announced plans to launch a joint-venture budget carrier for Asia with China Airlines.

Jetstar Hong Kong will launch next year and fly short-haul routes, including in China, Japan, South Korea and Southeast Asia, the firms said in a statement as they try to tap the huge Chinese market.

On currency markets the euro bought $1.3269 and 109.69 yen in Tokyo morning trade, compared with $1.3268 and 109.28 yen in New York late Friday. The dollar firmed to 82.74 yen from 82.33 yen.

Investors are looking to speeches later in the day by US Federal Reserve chief Ben Bernanke and Philadelphia Fed president Charles Plosser.

With two other Fed regional bank presidents voicing opposition to any new rounds of easing, further resistance from Plosser may lead Fed policymakers to take the view that additional easing measures were unnecessary, said Sumino Kamei, senior analyst at the Bank of Tokyo-Mitsubishi UFJ.

"This could support the dollar against the yen," she said. The euro was also buoyed by signs from Germany indicating it was contemplating allowing the eurozone's new, permanent rescue fund run in tandem for a while with its temporary predecessor.

Though the total lending capacity of the permanent fund, or European Stability Mechanism, would stay at 500 billion euros, the move would increase the combined firewall to 700 billion euros.

While boosting the fund has been regarded in international circles as essential in saving the currency bloc from fresh turmoil German Chancellor Angela Merkel had previously resisted such a measure.

On oil markets, New York's main contract, West Texas Intermediate crude for delivery in May, shed 25 cents to $106.62 per barrel while Brent North Sea crude for May was down 15 cents at $124.98.

Gold was at $1,664.05 an ounce at 0300 GMT, compared with $1,650.60 late Friday.