GLOBAL MARKETS-China shares spark Asia rally as reform plans buoy mood

Reuters

* China-share index in Hong Kong up 5.3 pct on hopes foreconomic reform

* Focus again on Fed policy ahead of October minutes

* BOJ meets Nov 20/21, to reaffirm aggressive stimulusprogram

* European shares to open flat to modestly lower -bookmakers

By Wayne Cole

SYDNEY, Nov 18 (Reuters) - Asian share markets advanced fora third straight session on Monday, cheered by the prospect ofextended stimulus in the United States and of real economicreform in China.

China's offshore market put on more than 5 percent,with UBS upgrading H-shares - Chinese stocks listed in Hong Kong- to "overweight" on a view the reforms announced after a partyplenum should help them outperform Asia ex-Japan for the nextfew months.

MSCI's broadest index of Asia-Pacific shares outside Japan added 1.4 percent, having boasted its best dailyrise in almost two months on Friday.

European shares were expected to open steady to slightlyweaker, with Britain's FTSE 100 seen down as much as 0.1percent, Germany's DAX down as much as 0.1 percent andFrance's CAC 40 seen trading flat, according tofinancial bookmakers.

The Chinese Communist Party unwrapped surprisingly boldreforms late last week, pledging to let the market play a"decisive" role in the economy.

That helped the Shanghai Composite rise 2.6 percent,its third straight session of gains, while Hong Kong's ChinaEnterprises Index surged 5.3 percent.

"Multiple growth-friendly measures were announced andrepresent the biggest freeing up of China's economic policysince the 1990s," said analysts at ANZ in a note.

"Our China economists think that if these reforms areimplemented successfully it will substantially reduce thedownside risks to China's economy." ANZ added.

Tokyo's Nikkei was little changed after touching asix-month peak earlier on Monday. Last week, the index amassedits biggest weekly rise in four years.

The Bank of Japan holds a policy meeting on Wednesday andThursday and is expected to maintain its ultra-loose policy. TheBOJ has been perhaps the most aggressive of any major centralbank in its asset buying, putting downward pressure on the yenin the process.

The U.S. dollar was trading at 100.07 yen on Monday,not far from its two-month high of 100.43. The euro bought135.10 yen but faced major resistance at the Octoberhighs around 135.50, a level not seen since November 2009.

The euro was steady on the U.S. dollar at $1.350,having edged slowly higher for the past week or so as taperingtalk weighed on the dollar. Measured against a basket ofcurrencies the dollar was a shade lower at 80.765.

THE FED COMMUNICATES

This is another important week for U.S. monetary policy asthere are a host of central bankers appearing, including FederalReserve Chairman Ben Bernanke, who speaks on "Communication andMonetary Policy" on Tuesday.

On Wednesday, the Fed releases minutes from its Octoberpolicy meeting, which will get trawled for hints on when itmight start winding back its asset-buying programme.

Last week, presumptive Fed chief Janet Yellen sounded in norush to taper, reinforcing market speculation that any move wasmore likely in March than December.

"If Fed officials think a December tapering is a realisticpossibility, some hints to that effect would presumably maketheir way into the minutes this week," said Michelle Girard,chief US economist at RBS.

"Just making clear that policymakers were open to takingaction in December if the economic data showed the impact of thegovernment shutdown was limited would likely suffice to shiftexpectations."

Girard still believes March is the more likely window for amove, if only because bond markets are typically very thin inDecember so a taper then could risk major dislocation.

Figures on consumer prices and retail sales are also due onWednesday and are expected to show that price pressures andspending both were subdued in October.

Speculation over the timing of stimulus tapering hasbuffeted markets since May when Bernanke first suggested arollback of the bond-buying programme was not far off.

In commodity markets, spot gold was steady at$1,286.80 an ounce, having crawled away from last week's troughof $1,260.89.

Brent crude for January delivery eased 36 cents to$108.14 a barrel. U.S. crude for January shed 37 cents to$93.47, having suffered their sixth weekly drop last week due toa larger-than-expected rise in inventories.

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