Asia stocks rally as oil falls below $134

By Kevin Plumberg

HONG KONG (Reuters) - Asia stocks rallied on Monday as the U.S. dollar rebounded and oil fell below $134 a barrel, boosting confidence in the region's exporters, but bonds fell on expectations central banks will raise rates to fight inflation.

Oil prices declined by $1 to $133.86 a barrel CLc1 after United Nations Secretary General Ban Ki-moon said Saudi Arabia, the world's largest crude exporter, had told him it will boost output to the fastest in decades.

Along with U.S. inflation data that showed underlying price pressures rose moderately in May, and the biggest weekly rise in the U.S. dollar in three years, the easing in crude prices improved the prospects of some of Asia's well-known exporters such as Canon (7751.T) in Japan and Samsung Electronics (005930.KS) in South Korea.

"A softer yen sparked hopes for upward earnings revisions for some exporters," said Takahiko Murai, general manager of equities at Nozomi Securities in Tokyo.

"But we have to brace for an eventual dramatic slowdown in Japan, where the stock market and the economy depend on overseas demand, considering the recent declines in Asian shares and rising inflation worries in emerging countries."

Japan's Nikkei share average .N225 climbed 2.5 percent with the yen falling to a four-month low against the dollar.

South Korea's KOSPI rose 1 percent and Taiwan's TAIEX jumped 1.2 percent, led by the technology sector.

The MSCI index of Asian equities .MIAS00000PUS rose 1.7 percent, after last week posting its largest decline since the week of August 19. Stocks in the Asia-Pacific region outside of Japan were up 1.2 percent on the day .MIWD00000PUS, the biggest gain in a month.