Asia stocks recover, but economy fears loom

By Kevin Plumberg

HONG KONG (Reuters) - Most Asian stock markets rallied on Monday, with valuations growing more attractive, and oil prices rose ahead of an expected supply cut at an emergency OPEC meeting this week, but a threat of global recession haunted investors.

The cautious buying of equities did not translate into a move out of government bonds, with Japanese government bond futures climbing and U.S. Treasury futures nearly unchanged on the day, suggesting investors were still reluctant to take risks.

Governments around the world rushed out further steps to help the private sector, pledging so far well in excess of $3 trillion to try to stabilise financial markets and resuscitate the banking industry which has been badly damaged by a crisis of confidence.

South Korea promised $130 billion in state guarantees and capital injections and the Dutch government said it would prop up ING (ING.AS)(ING.N) with around 10 billion euros.

"A slew of recent policy actions worldwide has provided some relief to the banking sectors in the major economies," said Kengo Suzuki, a currency strategist at Shinko Securities in Tokyo. "But the state of the market remains very fragile with worries mounting about the global economy and emerging markets," Suzuki said.

The MSCI index of Asia-Pacific stocks outside Japan .MIAPJ0000PUS rose 1.2 percent. The index suffered a seventh consecutive week of losses last week and remains down 52 percent so far this year.

Hong Kong's Hang Seng index .HSI jumped 2.2 percent, but is down 17.3 percent so far this month.

Japan's Nikkei average .N225 edged up 0.5 percent, though it is down 19 percent in October.