Asian Markets Rally on Strong Dollar, Weak Oil

Asian markets rallied Wednesday as investors joined Wall Street's optimism that the worst news from U.S. banks might be over and took heart from a strengthening dollar and falling oil prices. Japan and Australia both closed higher.

Asian investors also saw the bright side of Merrill Lynch's $5.7 billion writedown and share sale. The news had dented Asian stocks Tuesday, but U.S. shares rose as some investors took the view that the Merrill news may signal a possible turning point in the credit crisis.

The optimism was reinforced by a surprise gain in U.S. consumer confidence and a rise in the dollar to a one-month high against a basket of currencies on Tuesday.

The slump in oil prices also gave shares an extra boost. U.S. crude oil fell to $120.42 a barrel on Tuesday, its lowest in nearly three months, and was trading at $121.77 in the Asian session Wednesday, 42 cents down on the day.

Japan's Nikkei 225 Average rose 1.6 percent, with Matsushita Electric Industrial jumping on strong earnings results and financial shares gaining on easing U.S. credit fears. But investors dumped Sony after it posted a bigger-than-expected fall in quarterly profit and cut its outlook, hurt by sluggish mobile phone sales and price competition.

Seoul shares closed higher on Wednesday, led by exporters after oil prices fell and U.S. stocks rebounded, but the market trimmed its earlier gains as shipbuilders and Kumho Asiana Group-related shares tumbled.

Australian shares rose 1.8 percent, led by gains in banks and other recently battered stocks, as a drop in oil prices improved the outlook for economic growth and company profits.

Hong Kong shares rose nearly 2 percent to reclaim some ground lost in a four-session slump. Sinopec surged over 6 percent, before scaling back gains slightly, amid lower crude oil prices and talk that Asia's largest refiner has received close to 30 billion yuan ($4.4 billion) in government grant to compensate for its first half refining losses. Beijing Capital International Airport was one of the biggest percentage decliners on the exchange, falling nearly 11 percent at one point, after the company warned of a substantial decrease in its first-half profit on Tuesday.

Singapore's Straits Times Index rose 1.3 percent with banks such as DBS Group, leading the gains.

China's Shanghai Composite Index fell into negative territory as concerns about a slowing economy and heavy supplies of fresh equity offset the positive impact of rebounds in foreign share market.