GLOBAL MARKETS-Asia sidesteps Ukraine woes, vote hopes spur Indian stocks

Tue May 13, 2014 2:07am EDT

* Record high close on Wall Street lifts Asia stocks

* Spreadbetters expect higher European open

* Indian shares hit fresh record high on election hopes

* China data mostly as expected, market reaction limited

By Shinichi Saoshiro

TOKYO, May 13 (Reuters) - Asian shares and the dollar rose on Tuesday as tensions in Ukraine were eclipsed by a strong performance on Wall Street, with Indian equities rallying on hopes an election victory for the business-friendly opposition party would spur a revival in the region's third-biggest economy.

MSCI's broadest index of Asia-Pacific shares outside Japan advanced 0.6 percent and Tokyo's Nikkei gained 2 percent.

Financial spreadbetters expected Britain's FTSE 100 to open as much as 0.36 percent higher, Germany's DAX to rise 0.56 percent and France's CAC 40 up 0.17 percent.

The Dow and S&P 500 hit record closing highs on Monday, as strong corporate results and an improving economic outlook spurred a broad rally on Wall Street.

Indian shares rose as much as 1.9 percent to hit a new record high, boosted by exit polls predicting India's business-friendly opposition party would win in the world's biggest-ever election.

Still, analysts warn against exuberance as exit polls by media organisations have proven unreliable in the past. The actual results for India's five-week long elections will be out on Friday.

"A lot of expectation-based flows have come through. Looking through the noise, if the base scenario (opposition majority) happens, two things change structurally - first, you get a pro-investment government and one that is focused on infrastructure," said Salman Ahmed, global fixed income strategist for Lombard Odier Investment Managers in London.

Moreover, "a strong government that understands the need for infrastructure should be able to get reforms in place and put in place the conditions for long-term growth," Ahmed said.

Equity markets have so far brushed off a weekend referendum in Ukraine, where pro-Moscow rebel organizers said nearly 90 percent had voted in favour of self-rule, possibly inflaming the conflict.

"Investors are so far taking (Russian President Vladimir) Putin at his word that eastern Ukraine will not be repeat performance of Crimea and don't seem too concerned about the next round of US/EU sanctions given the weakness of those offered to date," Jasper Lawler, market analyst at CMC Markets, wrote in a note to clients.

"With Donetsk now officially asking to join Russia, Putin's diplomacy will be fully put to the test," Lawler added.

The markets showed limited reaction to industrial production and retail sales data from China, which were roughly in line with forecasts.

The dollar edged up to brush a one-week high of 102.33 yen , helped by higher U.S. Treasury yields on investor caution ahead of a slew of data this week that could paint a brighter economic picture.

The euro remained on the defensive at $1.3759, stuck close to a one-month low of $1.3745 hit on Friday after European Central Bank President Mario Draghi fired a verbal warning against the common currency's recent gains.

The oil market remained a little more sensitive to tensions in the Ukraine, with U.S. crude steady at $100.59 a barrel after gaining 60 cents on Monday.

Three-month nickel on the London Metal Exchange surged to $21,625 a tonne - its highest since February 2012, as the threat of tougher Western sanctions on the world's biggest producer Russia compounded concerns about Indonesia's ban on unprocessed ore exports.

LME copper slipped 0.7 percent to $6,832.00 a tonne as traders took profits on Monday's 2 percent surge. (Additional reporting by Abhishek Vishnoi and Rafael Nam in Mumbai; Editing by Shri Navaratnam and Chris Gallagher)

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