Japan Leads Asia on Signs of US Recovery

Japanese stocks led Asian equities higher on Tuesday, climbing to their highest since May, with investors betting the improving U.S. recovery may be reflected in jobs data later in the week.

The FTSE CNBC Asia 100Index inched 0.1 percent higher.

The Nikkei 225 stock average climbed to a 7-½ month closing high on its first day of trading for the year, helped by strong global manufacturing datathat lifted equities worldwide and by a bounce in the dollar against the yen.

Buying of Nikkei futures bolstered the cash market, with analysts saying there were few sell orders and adding that sentiment for the index remains positive after a strong run that has seen it gain 13 percent since November.

The benchmark Nikkei finished 1.7 percent or 169.18 points higher at 10,398.10. The broader Topix index gained 1.5 percent to 911.80.

U.S. manufacturing grew for a 17th straight month, the Institute for Supply Management said on Monday. The data followed reports of faster growth in European manufacturing and bolstered investors' appetite for riskier assets.

A bounce in the dollar back to about 82.20 yen after it slipped below 81 at the year-end to its lowest in nearly two months was also seen as a positive short-term factor, traders said, although the dollar's recent softness is likely to weigh on exporters' shares in the long run.

Resource-related companies were in favor as oil prices traded near a 27-month peakhit on Monday following the upbeat European and U.S. manufacturing data and forecasts of cold weather.

Inpex Corp, Japan's top oil and gas developer, surged 4 percent to 494,500 yen. Other commodity stocks also rallied on broad gains in commodities prices. Massive floods in Australiadisrupted a big chunk of the world's metallurgical coal supply, while copper hit record highs and natural gas posted its biggest gain in more than a month.

Nonferrous metals smelter Sumitomo Metal Mining rose 2.1 percent to 1,449 yen and Dowa Holdings gained 3.2 percent to 550 yen.

Banks and other financial shares rose in the wake of gains in their U.S. counterparts, with Mizuho Financial Group becoming the most actively traded stock by volume on the Tokyo Stock Exchange's first section. Mizuho gained 2 percent to 156 yen.

Seoul Shares End at Fresh Closing High

Seoul shares posted a new closing high on Tuesday, buoyed by continued foreign buying and firm gains in shipyards such as Daewoo Shipbuilding & Marine Engineering.

The Korea Composite Stock Price Index (KOSPI) ended up 0.73 percent at 2,085.14 points, mere points away from the index's all-time high of 2,085.45 points.

Firm gains in shipyards added to upside momentum. Hyundai Heavy Industries, the world's No.1 shipbuilder, rose 3.8 percent. Daewoo Shipbuilding & Marine Engineering gained 2.5 percent.

Doosan Engine, which made its market debut on Monday, ended the session at 25,700 won, up 33 percent from its IPO price of 19,300 won.

Shares in Hyundai Engineering & Construction rose 3.5 percent ahead of the South Korean court's ruling on Hyundai Group's request to ban Hyundai E&C shareholders from canceling the takeover agreement.

Shares in Hyundai Merchant Marine, a key unit of Hyundai Group, gained 2.4 percent. Shares in Hyundai Motor underperformed, edging up 0.6 percent.

POSCO rose 2.8 percent after news that an Indian government panel had approved a long-delayed steel mill project. The panel said on Monday that there were no ecological concerns over the $12 billion steel mill, adding that its recommendation was for an initial annual capacity of 4 million tonnes (mpta) and that other studies were needed before approving expansion to 12 mpta.

Airlines and tour issues outperformed, lifted by persistent strength in the won, which hit a seven-week high. Both Korean Air Lines and Asiana Airlines gained 2.8 percent. Modetour Network, an on-and-offline tour agency, advanced 1.5 percent.

China Off to Strong Start for Year

Chinese stocks started 2011 in a bullish mood, giving a lift to Hong Kong's market, as investors snapped up beaten down shares of companies most likely to benefit from a recovery in global economic activity.

The Shanghai Composite, Asia's worst performing market in 2010 with an over 14 percent decline, rose 1.6 percent. Hong Kong's Hang Seng rose 1 percent on good volume as turnover rebounded from the thin levels seen over the holidays.

China's purchasing managers' index (PMI) published over the weekend showed that manufacturing growth slowed in December while factory inflation moderated, trends which investors hope will lessen the need for harsher tightening policies from Beijing. A plunge in China's money market rates also signaled that a cash crunch in the financial system that had pegged the markets back in December was easing.

The materials sector rose as a rally in commodity prices, in particular coal, showed few signs of letting up.

Optimism over demand on the back of a recovering global economy and supply disruptions in Australia due to heavy flooding is supporting coal prices, benefiting Chinese producers.

State-owned China Shenhua Energy, the world's top producer of coal by market value, rose 2 percent in Shanghai, while Hong Kong-listed Shenhua shares were up 2.9 percent.

Australia's biggest floods in decades have forced evacuations of mining areas and curtailed coal exports as major miners canceled shipments and declared force majeure.

Yanzhou Coal Mining rose 3.1 percent to a record high as it extended gains after breaking out of a tight range late last month.

Shipping-related stocks also advanced on optimism that stronger manufacturing globally would boost demand for exports. Container port operator Cosco Pacific rose 4.5 percent, while China Shipping Container Lines jumped 5 percent.

Chinese property counters, trading at low valuations compared to their historical averages, jumped after a local media report said authorities might delay a property tax due to disputes among government departments.

China's State Council, the cabinet, has repeatedly vowed to start a trial on property taxes as soon as possible, without giving any further details about the program.

China Vanke, the country's biggest listed developer, jumped 7.1 percent in morning trading, while rival Gemdale surged 10 percent to its daily limit.

Floods Hit Australia Insurers

Australian shares gave up early gains to close slightly weaker on Tuesday after profit-taking drove industrial stocks lower although strong commodity prices buoyed the mining and energy sector.

The market opened in positive territory after U.S. data suggested a recovery in the world's biggest economy was gathering momentum, but lost traction by late morning as investors piled out of major banks, retailers and other key blue-chips.

The S&P/ASX 200 index closed 2.74 points lower at 4,742.5, well off an early high of 4775.0.

Insurer Suncorp and Insurance Australia Group fell 3.02 percent and 1.55 percent respectively on concerns about mounting claims from massive floods in northern Queensland state.

The floods in the region, which produces about a third of Australia's coal, has hit export volumes for coal miners. Wesfarmers shares were 0.6 percent lower on Tuesday after it cut its coking-coal sales forecasts although it added floodwaters were easing.

Rising commodity prices buoyed most major miners, however. BHP Billiton was the most heavily traded stock, rising 0.4 percent to make up some of last Friday's 1.3 percent loss, amid media speculation it may bid for U.S. energy firm Anadarko.

Rio Tinto ended 0.4 percent higher at A$85.80. Coal and Allied , which is 76 percent owned by Rio, rallied 6.5 percent to A$127.70, making up for some of its recent losses due to the impact of rains on its mining operations.

Shares in Australian rare earths miner Lynas Corp continued to
rally after China last week cut its export quotas for the minerals. Lynas shares were up another 11.7 percent to A$2.30 on Tuesday.

Singapore's Straits Times Index closed up 0.5 percent while the KL Composite jumped 1.2 percent.