STI up 0.6% as Tokyo leads Asian market rebound

TOKYO (AFP, Reuters) - Japanese stocks led a rally in Asia on Monday, after solid U.S. data and earnings calmed tumult in global financial markets and reassured investors worried about the health of the world economy.

The Nikkei 225 index at the Tokyo Stock Exchange, which closed at a five-month low last week, rose 3.34 per cent, or 486.04 points, to 15,018.55 by the break.

Singapore's Straits Times Index was trading up 20 points or 0.6 per cent at 3,187.74 at 11:20am. Among the top gainers, DBS was up 18 cents at while Keppel Corp was trading 15 cents higher.

Investors took their lead from Wall Street, where the three main indexes saw healthy advances Friday on bargain-buying and following upbeat earnings from General Electric and Morgan Stanley. The Dow added 1.63 per cent, the S&P 500 jumped 1.29 per cent and the Nasdaq gained 0.97 per cent.

The Thomson Reuters/University of Michigan index of consumer sentiment out Friday was also surprisingly strong in early October, rising to more than a seven-year high. Other data also showed new housing starts rose more than expected last month, suggesting U.S. economic growth was solid.

Also boosting sentiment, Japan's leading Nikkei business daily reported Monday that the national pension fund, the world's largest, is working out plans to boost its domestic stock holdings. And in an interview with the Financial Times, Japanese Prime Minister Shinzo Abe hinted that he may delay a second sales tax hike next year after a levy rise in April - aimed at paying down a massive national debt - hit growth in the world's number-three economy.

Shares in Shanghai and Hog Kong added 0.5 per cent, after sources said on Friday that China's central bank is set to inject about 200 billion yuan worth of three-month loans into five or six medium-sized listed banks to keep liquidity ample and support the slowing Chinese economy.

Data on Tuesday is expected to show that China's economy likely grew at its weakest pace in more than five years in the third quarter as a property downturn weighed on demand, according to analysts polled by Reuters, raising the chances of more aggressive policy steps.

Kyoya Okazawa, head of global equities at BNP Paribas in Tokyo, said much of the rise in Asian shares was due to funds reducing their downside hedges, so he called Monday's broad gains a "mostly technical rebound."

Strategists also remained wary as the negative factors which dragged down global shares last week have not completely evaporated.

"With Halloween just around the corner, the market was spooked by 'ghosts' and these ghosts will probably stick around longer," said Hiroyuki Nakai, chief strategist at Tokai Tokyo Research Center. "The ghosts are European economic concerns, worries on what could happen after the Fed ends tapering, and fears about Ebola."