GLOBAL MARKETS-Asia shares draw cheer from record-breaking Wall St

Thu Dec 26, 2013 6:29pm EST

* Nikkei eyes another six-year peak, Japan data upbeat

* Yen hits five-year lows on dollar and euro

* US 10-year yields touch 3 pct amid rush to risk

By Wayne Cole

SYDNEY, Dec 27 (Reuters) - Asian markets looked well placed on Friday as Wall Street reached record heights for a fourth straight session while rising U.S. yields lifted the dollar to new peaks on the yen.

Australian shares made the early running with a rise of 0.7 percent, heading for a fifth session of gains. MSCI's broadest index of Asia-Pacific shares outside Japan lagged a little with an increase of 0.1 percent.

Markets were rising on the tailwind from Wall Street where the Dow added 0.75 percent to make another all-time top. The S&P 500 rose 0.47 percent bringing its gains for the year so far to 29 percent.

Tokyo's Nikkei looks likely to make another six-year high, helped in part by demand from retail investors using new tax-free investment accounts.

The government-sponsored investment plan, known as Nippon Individual Savings Account, will provide a five-year tax holiday on dividends and capital gains provided the money is invested in stocks, mutual funds or exchange traded funds.

The benchmark Nikkei has climbed almost 56 percent this year, its best annual performance since 1972, driven by Japan's aggressive fiscal and monetary stimulus.

The effort seems to be working with figures out Friday showing Japanese manufacturing activity expanding at the fastest clip in more than seven years while firms added workers at the quickest pace in over six years.

The same money printing by the Bank of Japan has lifted the dollar 22 percent against the yen so far this year in the largest annual rise since 1979.

The greenback was up at 104.82 yen on Friday having been as far as 104.85. Option-related offers at 105 yen are seen as a major hurdle and some traders suspect this resistance level may not be broken until next month, when more investors return from holidays.

The euro also hit a five-year high of 143.52 yen, and was last at 143.44. The single currency was steady on the dollar at $1.3690, some way off last week's high of $1.3811.

While the euro zone's recovery is seen as sluggish, the currency has been underpinned by European banks' repatriation as well as buying by euro zone exporters as the region's current account surplus has increased sharply.

Supporting the dollar has been a rise in U.S. Treasury yields, with the 10-year note touching 3 percent again.

When yields got to these heights back in September it spooked the equity markets, in part because of fears rising mortgage rates would hurt the recovery in housing.

This time a run of upbeat data have reassured investors that the economy can withstand higher borrowing costs.

Figures out on Thursday underlined the improving outlook for jobs as filings for unemployment benefits took a surprisingly sharp drop to 338,000.

MasterCard Advisors SpendingPulse reported sales between Nov. 1 and Dec. 24 rose 2.3 percent, offsetting concerns that the holiday season had been weak.

In commodity markets, the long rally in equities and a lack of inflation has taken the shine off gold which still look set to suffer its biggest annual loss in three decades. On Friday, the metal was trading at $1,210.49 having failed to sustain a bounce to $1,215.70.

Crude oil futures were boosted by demand for refined products after industry data earlier this week showed a steep decline in gasoline and distillate inventories.

Brent crude settled 10 cents higher at $112.00 a barrel, while U.S. crude firmed 8 cents to $99.62.

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