Asian Markets Rally, But Caution Ahead of G20

Asian shares rallied and oil held on to gains Friday as this week's sharp losses were seen as excessive even as signals continued to flash 'danger' for the global economy ahead of a G20 meeting this weekend.

The gains came despite bleak signals on the global economy, which provide a bad omen for export-dependent Asia. Leaders of the G20 industrialized and emerging nations will gather in Washington late on Fridayto discuss the economic crisis.

Data on Thursday showed U.S. workers drawing jobless benefits hit a 25-year high this month, while imports to the world's biggest economy suffered a record fall in September. Elsewhere, Germany fell into recessionin the third quarter, data on Thursday showed, while the Organisation for Economic Cooperation and Development slashed its economic output forecasts for major economies and said the 30-nation OECD appeared to have entered a recession.

Oil prices held on to gains after jumping nearly 4 percent Thursday as OPEC seemed poised to cut production later this month, and a rebound in U.S. stocks bolstered risk appetite. U.S. crude was trading just below $59 a barrel. The U.S. dollar strengthened against the euro while the yen rose as risk appetite increased.

In Tokyo, the Nikkei 225 Average gained 2.7 percent, snapping a three-day losing run, as a rally in U.S. stocks triggered short-covering, with investors picking up beaten-down shares such as industrial robot maker Fanuc.

Seoul shares ended flat after volatile trade that saw the index rise as much as 3.8 percent led by shipbuilders, but falls in large cap tech issues such as Samsung Electronics weighed on the market.

Australian shares closed 1.4 percent higher as miners BHP Billiton and Rio Tinto rallied on a rebound on Wall Street, but a drop in bank shares dragged the market down from its early highs. Traders said the initial enthusiasm from Wall Street's over 6 percent surge on Thursday waned as investors focused on underlying economic gloom, and sold shares in firms reliant on domestic economic growth, such as banks.

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Hong Kong's Hang Seng shares rose 2.4 percent as energy stocks such as CNOOC cheered a jump in oil prices on worries over output cuts, while Wharf Holdings rose after a rating upgrade. Local developer and port operator Wharf surged 8.9 percent after Merrill
Lynch upgraded the stock to neutral from underperform, saying it was trading at a 60 percent discount to its revised 2009 net asset value forecast.

Singapore's Straits Times Index gained 0.2 percent. Shares of People's Food soared 29.9 percent after it announced a 147 percent rise in third quarter net profit on Thursday.

China's Shanghai Composite Index rose 4.4 percent to its highest in more than three weeks, bolstered by speculation of an imminent interest rate cut while property shares rose on expected government support for the sector.