HONG KONG (Reuters) - Japan's Nikkei index rose nearly 4 percent on Tuesday, as exporters gained on the yen's recent weakness, though other markets were down after reports pointed to a shriveling U.S. economy ahead of the presidential election.
The elimination of uncertainty surrounding the election could provide a short-term boost to the dollar and equities though the longer-term impact on investor sentiment, especially with regard to rescue policies shaped only in the last several weeks, was unclear.
Meanwhile, economic data in Europe and the United States indicated the strong likelihood both have slipped into recessions, keeping oil prices trading below $64 a barrel and pushing up gold prices.
"Depending on the actual results, the U.S. election may provide some support to markets globally as it may be seen as the promise of more fiscal stimulus, particularly if Obama wins the election," currency strategists with Calyon in Hong Kong said in a note.
The Nikkei rose 3.7 percent after a holiday on Monday, having rallied a staggering 28 percent from a 26-year intraday low hit a week ago.
Asia-Pacific stocks traded outside Japan fell 1.9 percent, according to an MSCI index, snapping a five-day winning streak. The index has retraced a third of the decline that happened in the wake of Lehman Brothers' collapse in mid-September, and was just shy of a 38.2 percent rebound, a key technical obstacle.
South Korea's KOSPI rose 1.6 percent, up for a second day after the government unveiled an additional $11 billion in tax cuts and other measures to boost the economy.
Hong Kong's Hang Seng index dropped 2 percent, weighed by shares of companies sensitive to changes in oil prices such as PetroChina and CNOOC
Australia's benchmark S&P/ASX 200 index slipped 1.9 percent but was well above a 4-year low plumbed a week ago, ahead of a policy decision from the Reserve Bank of Australia.
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The RBA was widely expected to cut its cash rate by a half-percentage point to the lowest since May 2006, action that would show solidarity with the Federal Reserve and the Bank of Japan, which both reduced borrowing costs last week.
The European Central Bank and the Bank of England will probably both cut rates after they meet on Thursday, as policymakers race to keep their economies tumbling into deep recessions.
Synchronized rate cutting by central banks around the world as well as emergency government spending packages worth some $4 trillion have brought back investors from pushing markets down an abyss. However, some analysts say it may be premature to dive back into risky assets.
"We expect another major episode of risk aversion to take hold of markets in the near future, with the potential for commodities and stocks to hit new lows for the year. This would bode well for the yen and short ends of G-3 bonds," said Dariusz Kowalczyk, chief investment strategist with CFC Seymour in Hong Kong.
The U.S. dollar slipped 0.2 percent to 98.97 yen after rising as high as 99.36 yen in early Asian trade on trading platform EBS. The dollar is expected to stay below the psychologically important 100 yen level since Japanese exporters are expected to sell dollars to repatriate their profits. Many exporters are assuming a rate of 100 yen in their business plans for the fiscal year ending in March.
The euro fell 0.3 percent against the yen to 124.90 yen.
Commodity prices have been clobbered on expectations of easing demand. Global manufacturing activity contracted for a fifth consecutive month in October, falling to a record low, a JP Morgan Global Manufacturing PMI survey showed, and U.S. car sales dropped by a third to the lowest in 25 years.
U.S. crude for December delivery was trading down 12 cents, or 0.2 percent, at $63.79 a barrel, after settling down $3.90 on Monday.
Gold in the spot market rose 0.7 percent to $727.50, though weak physical demand kept a lid on prices.
