Asian shares rise as oil prices fall

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The euro extended its rally against the dollar as expectations grow that the European Central Bank will hike interest rates soon as it tries to take the heat out of rising eurozone inflation.

Tokyo gained 0.71 per cent, or 74.05 points, to end at 10,526.76 and Sydney ended 0.57 per cent, or 27.2 points, higher at 4,836.5, while Seoul closed 0.69 per cent, or 13.54 points, up at 1,963.42.

Hong Kong jumped 1.82 per cent, or 411.33 points, to 23,012.37 after four straight days of losses.

Shanghai closed flat at 2,878.57 as strong bank results and easing fears over monetary tightening were offset by weaker gold miners and oil firms.

The oil price rally sparked by turmoil in the Middle East was halted, at least temporarily, after the Organisation of the Petroleum Exporting Countries (OPEC) said it would increase production to make up for any losses caused by unrest in oil exporter Libya.

Saudi Oil Minister Ali al-Naimi said his country would increase output, according to commodities specialist Platts.

Jitters returned later in the day but oil prices were still well down from this week's earlier highs.

Brent North Sea crude for April delivery was up $1.26 at $112.62 per barrel after almost hitting $120 late Thursday.

New York's main contract, light sweet crude for April, rose 36 cents to $97.64 after earlier heading north of $100.

Global stock markets have fallen over the past week as uprisings across the oil-rich Middle East and North Africa sparked fears of surging oil prices.

This in turn fuelled inflationary worries as many countries struggle to keep a lid on prices in the wake of the global financial crisis.

"With food prices already at very high levels, the last thing the global economy needs now is soaring energy prices," said Khoon Goh, a senior economist at ANZ Bank in Wellington.

"Such a combination will surely present a real inflation challenge for central banks around the world," he told Dow Jones Newswires.

The troubles in Libya, where Moamer Kadhafi was clinging to his four-decade rule, kept a cap on gains, however, as the death toll from the unrest climbs higher and thousands try to flee the country.

The euro climbed against the greenback after German central bank chief Axel Weber said Thursday that interest rates "can only go one way from here".

"Rates only know one direction at the moment -- and that is north," he said.

The single European currency changed hands at $1.3817 in Tokyo afternoon trading, compared to 1.3797 in New York late Thursday. It rose to 113.29 yen from 112.94 yen.

Sumino Kamei, senior analyst at the Bank of Tokyo-Mitsubishi UFJ, said: "The hawkish comment from Weber gave an additional fuel to speculation about the ECB's rate hike."

The dollar fetched 81.96 yen, little changed from 81.91 yen.

On the Tokyo exchange, car giant Toyota rose 2.18 per cent to 3,755 yen despite news that it is recalling more than two million vehicles to fix floor mat and carpet defects that could jam the accelerator.

The improved sentiment saw the price of safe-haven gold lower than recent highs and it closed at $1,408.00-$1,409.00 an ounce, down from Thursday's close of $1,414.00-$1,415.00.

In other markets:

-- Singapore closed up 1.75 per cent, or 52.08 points, at 3,025.16.

Oversea-Chinese Banking Corp rose 0.87 per cent to Sg$9.26 and Singapore Airlines gained 1.46 per cent to Sg$13.86.

-- Taipei rose 0.68 per cent, or 58.01 points, to 8,599.65.

Chunghwa Telecom was up 0.23 per cent at Tw$88.1.

-- Manila gained 0.17 per cent, or 6.20 points, to 3,737.04.

Aboitiz Equity rose 2.3 per cent to 40.00 pesos and Philippine Long Distance Telephone gained 1.1 per cent to 2,222, but Metropolitan Bank was off 0.5 per cent at 56.95.

-- Jakarta rose 0.13 per cent, or 4.40 points, to 3,443.53.

Coal producer Bumi rose 5.4 per cent to 2,925 rupiah, car maker Astra ended up 0.3 per cent at 51,550 and Bank Central Asia fell 2.4 per cent to 6,100.

-- Kuala Lumpur closed flat at 1,489.27.

Petronas Chemicals climbed 1.4 per cent to 6.30 ringgit as plantations giant Sime Darby rose 0.2 per cent to 9.04 and construction firm KL Kepong slid 2.8 per cent to 20.20.

-- Wellington edged down 0.13 per cent, or 4.44 points, to 3,363.91.

Auckland Airport fell 0.9 per cent to NZ$2.24 and resins maker Nuplex edged down 2.4 per cent to NZ$3.31, but Fletcher Building gained 0.6 per cent to NZ$8.63.

-- Bangkok edged up 0.89 per cent or 8.69 points to 985.91.

Banpu added 4.00 baht to 740.00, while PTT gained 3.00 baht to 343.00.

-- Mumbai's benchmark 30-share Sensex index rose 68.5 points to 17,700.91 after the government said Friday the country's economy could grow by over nine per cent next year but warned inflation remained a concern

India's second biggest mobile phone firm Reliance Communications fell 5.4 per cent or five rupees to 87.55 on growing concerns over the ongoing probe into a suspected multi-billion-dollar telecom scandal.

Kernex Microsystems, which makes rail safety devices, fell 4.97 per cent or 4.95 rupees to 94.6 while private rail wagon maker Titagarh Wagons, plunged 13.06 per cent or 49.85 rupees to 331.8.