Asia Hits Four-Month High, Tokyo Gains 3.9%

Asian markets hit four-month highs Thursday as investors took heart from signs of improvement in the U.S. economy suggesting regional exporters may need to start cranking up production.

A record drop in U.S. business inventories in the first-quarter and surprisingly robust consumer spending were widely seen by economists as positive pointing to a growth pick-up in the world's largest economy in coming months.

The U.S. Federal Reserve tweaked its policy statement to say that the economic outlook was improving, while vowing to keep rates at a historic low for a long stretch.

Data in Japan showing industrial production grew twice as much as expectedin March thanks to strong Chinese demand for electronics is one of the main factors fuelling the rally in Asian technology shares in the past two months.

The multiple signs of economic activity recovering around the world has stoked expectations that Asian companies and exporters may have cut inventories too quickly and may need to switch gears and start restocking to meet demand.

Investors have also taken in stride the outbreak of swine flu around the world that prompted the World Health Organization on Wednesday to raise its threat level, saying the world is on the brink of a pandemic. Mexico's government called for all businesses that are not crucial to the economy or public safety to close between May 1-5 to help contain the swine flu

The U.S. dollar fell against both the euro and the yen . Oil prices climbed above $51 per barrel as optimism the U.S. recession was easing raised expectations of a rebound in energy demand from the world's largest consumer.

Japan's Nikkei 225 Average jumped 3.9 percent as exporters climbed on upbeat data that fueled hopes for the global economy, while Honda Motor surged after forecasting a small profit for this year.

Seoul shares closed up 2.31 percent after touching their highest level this year as hopes for a global recovery lifted banks and builders, although exporters such as LG Display fell on the
stronger won. KB Financial Group, which runs South Korea's biggest lender Kookmin and is due to report earnings later in the day, climbed 6 percent. LG Display, the world's second-biggest liquid crystal display maker, dropped 0.63 percent.

Australian shares rallied 2.3 percent, rising for a second straight month, as top banks recovered from this week's battering, while Macquarie Group jumped ahead of its full-year earnings on Friday.

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Hong Kong's Hang Seng Index leapt 3.8 percent, but China Mobile sagged after agreeing to buy a stake in a Taiwanese mobile carrier. Shares in the world's largest wireless carrier dropped 0.7 percent after it said it would buy a 12 percent stake in Far EasTone for $529 million. Analysts said the news puts a slight damper on investor hopes for a higher dividend payout from the company this year, as it may use cash reserves to make further acquisitions. But the negative impact on the stock is expected to be short-lived.

Singapore's Straits Times Index advanced 3.8 percent with banks such as UOB, DBS Group and OCBC all sharply higher.

China's Shanghai Composite Index rose 0.4 percent, with property and cement shares strong after a cut in capital requirements for investment projects while Shanghai-based firms gained on plans to build the city into a global financial centre.

Thursday marks the last day of the week for many markets around the world observing May 1 holidays. In Asia, markets in South Korea, Taiwan, Hong Kong and Singapore among others will be closed on Friday. Japanese markets will be open but then close Monday through Wednesday for the rest of the country's Golden Week break.