Asia stocks up on hopes of recovery

By Kevin Plumberg

HONG KONG (Reuters) - Asian stocks edged up for a seventh day on Tuesday, boosted by hopes for a global economic recovery later in 2009, though the rising yen and falling high-yielding currencies suggested such optimism was limited.

Investors continued to move money stashed in government bonds to equities as their willingness to take risks recovered with low interest rates around the world and governments essentially writing blank cheques for plans to revive sagging economies.

Long-dated U.S. Treasuries were under pressure after the 30-year yield surged overnight, rising above 3 percent for the first time since mid December, as the market demanded more incentive to lend to the increasingly indebted U.S. government.

Expectations that U.S. President-elect Barack Obama will offer $310 billion in tax cuts as part of a $775 billion plan to support the economy has fed into a recovery in investors' willingness to take risks. Germany also was reportedly considering tax cuts to revive Europe's largest economy.

Still, the global economy showed few signs of near-term improvement. U.S. auto sales posted their weakest year since 1992 and total job losses were expected to be the highest in the post-war period.

"Indicators of market stress continue to improve whilst bond yields continue to back up in line with the improvement in risk appetite over recent weeks and consistent with an asset class rotation from bonds to equities," said Calyon strategists in a note.

"We remain cautious about the potential for this to continue and suspect that the flow of money back into riskier assets that has gained momentum over recent weeks will stall soon."

The MSCI index of Asia-Pacific stocks outside Japan .MIAPJ0000PUS rose for a seventh straight day, up 1.1 percent to a two-month high and shrugging off weakness on Wall Street where investors took profits on last week's run-up.