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Asian Markets Extend Rally But Caution Sets In

Asian markets started the new quarter with more gains after an impressive performance in March on expectations the frail global economy is about to bottom out and hopes the financial system was on the mend.

However, the safe-haven yen also rose on concerns about the fate of General Motors and Chrysler, in a possible sign that more bad news could spur investors to ditch riskier assets just as quickly as they piled in on March.

U.S. stock futures had been hit during Asia trade Wednesday after Bloomberg reported U.S. President Barack Obama had decided on a pre-packaged bankruptcy for GM. A senior administration official later called that report "inaccurate."

Oil prices dropped more than 2 percent to trade below $49 a barrel, dragged down by an industry report showing a larger-than-expected rise in U.S. crude stocks, while gold prices held firm. The yen strengthened against both the dollar and the euro .

Leaders from the G20 group of the world's biggest economies meet on Thursday with little hope they will find concrete solutions to the worst global economic crisis in decades.

Evidence of economic weakness abound. Data on Wednesday showed Japanesebusiness confidence tumbled to a record low, while reports on Tuesday showed plunging U.S. home prices and consumer confidence holding at just above record lows.

Japan's Nikkei 225 Average closed 3 percent higher, with carmakers such as Honda Motor climbing on relief that a solution for struggling U.S. automakers could be near, prompting bargain hunting. Elpida Memory soared over 14 percent after Taiwan Memory, a new computer memory chip company supported by the Taiwan government, said Elpida had been confirmed as its memory partner. Honda surged 6.7 percent, outperforming the transport subindex, after announcing production cuts in North Americaby 62,000 vehicles and pay cuts for salaried and factory workers

South Korea's KOSPI was finished 2.3 percent higher led by banking and auto issues including KB Financial Group and Hyundai Motor, with news of a record high trade surplus in March lending further help.

Australian stocks eased 0.1 percent, down for a third straight day and pressured by drops in Macquarie Group and Rio Tinto, but banks gained on hopes of an interest rate cut next
week. The market oscillated between positive and negative territory during the day, reflecting a lack of confidence, and ignored Wall Street's gains on Tuesday.

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Hong Kong shares dropped 0.4 percent after starting on a firm note, with China Unicom among the top drags on the index as investors fretted over the wireless operator's capital expenditure plan. But BOC Hong Kong soared 9.7 percent after its parent
Bank of China, the country's largest foreign exchange lender, said it would raise its stake, currently at 65.77 percent, in its unit by market purchases over the next 12 months.

Singapore's Straits Times Index closed 2.3 percent higher, led by financials such as DBS Group.

China's Shanghai Composite Index climbed nearly 1.5 percent to test major chart resistance in heavy trade, buoyed by hopes for an economic recovery and an ample supply of funds for short-term speculation in shares.