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By Bill Tarrant

 
SINGAPORE, March 19 (Reuters) - Tokyo's resurgent stock market led an Asian rally on Tuesday powered by technology gains after key brokerages raised forecasts for economic growth in the United States, the region's biggest trading partner.

A surge in oil prices past $25 a barrel to a six-month high formed a dark cloud on an otherwise sunny economic horizon.

The U.S. Federal Reserve's policy-making committee was to meet later on Tuesday, which also added inertia to the early spring rally. Economists expect the Fed to leave rates unchanged but may signal a future tightening in monetary policy.

The yen was flat against the dollar after falling 1.6 percent on Monday for its biggest one-day drop in almost six months, as players placed bets on possible Fed rate hikes later in the year that would lure funds into dollar instruments.

Japan's benchmark Nikkei 225 average closed up 2.56 percent at 11,792.82 as investors welcomed a plan by Mitsubishi Electric Corp and Hitachi Ltd to create the world's third largest chipmaker.

What could be a Japanese chip sector counter-offensive to recapture market share from global rivals lifted other tech giants like Toshiba Corp and Sony.

Analysts have said if the Nikkei ends the business year to March 31 as high as 12,000, banks could slash latent losses in their vast shareholdings and be better positioned to write off bad debts in the next business year.

"We should no longer worry about a March crisis and that's certainly improving the market's sentiment," said Hiroshi Ariga, deputy general manager at Norinchukin Zenkyoren Asset.

"BREATHTAKING" U.S. RECOVERY

Wall Street houses Merrill Lynch and Salomon Smith Barney set the tone for Asian trading, issuing forecasts early on Tuesday of five percent or better growth in the U.S. first quarter GDP.

The recovery is gaining speed at a "breathtaking rate," Salomon Smith Barney's economist Robert DiClemente said.

Merrill Lynch Chief Economist Bruce Steinberg said inventories are being reduced much faster than expected, giving a big boost to production.

South Korean shares leapt to a 23-month high with Samsung SDI (06400.KS), the world's top display maker, soaring 8.23 percent. The benchmark KOSPI index closed up 2.33 percent to 889.98.

"1,000 points doesn't look far away," said Kim Tae-woo, portfolio manager at Mirae Asset Management Co.

Daewoo Motor Sales accelerated 13 percent after the president of its car-making parent said only slight differences remain in its sale to General Motors Corp.

FED WATCHING MODE

Australia's market inched up after being tugged between competing forces -- gold and energy stocks taking momentum from the uptick in gold and oil prices, but blue chips awaiting clues about the direction of interest rates at home and abroad.

The benchmark S&P/ASX200 index closed 0.2 percent higher to 3,460.3 points.

Hong Kong's Hang Seng index also edged up 0.2 percent to 11,253.03 at mid-day, with the the market in Fed watching mode. The United States is the territory's biggest trade partner.

Singapore shares snapped a two-week consolidation trend as funds bought blue chips such as Singapore Airlines and banks, betting on a U.S.-led economic turnaround. The benchmark Straits Times Index was up 0.99 percent to 1,804.03.

China's stocks were higher at midday with punters unfazed by China Merchants Bank's looming domestic initial public offering.

China Merchants said on Tuesday it aimed to raise 10 billion yuan ($1.21 billion) for a Shanghai listing later this month. Brokers said the size of the IPO -- which had been weighing on the market over concerns it would sap liquidity from existing shares -- had already been discounted.

The Shanghai B share index was up 1.45 percent by 0600 gmt.

02:13 03-19-02

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