UPDATE:Asian Shares Mostly Up; Japan Stks Hit By Strong Yen

SINGAPORE -- Asian equity markets mostly advanced Tuesday inspired by solid gains for U.S. stocks, though some markets had slipped off earlier highs or were trading lower. In Tokyo the Nikkei 225 Stock Average had turned negative, as continued strength of the Japanese yen fueled earnings concerns for the country's exporters.

The rises in Asia largely failed to match the magnitude of the Industrial Average's 1.2% gain Monday. "Wall Street's rally doesn't mean the correction in U.S. stocks is over," said Yumi Nishimura at Daiwa Securities SMBC.

Japan's Nikkei 225 was 0.2% lower after being up 0.7% in the morning, South Korea's Kospi Composite also turned lower and was down 0.6%. New Zealand's NZX-50 gained 0.4% and Hong Kong's Hang Seng Index added 0.7%. DJIA futures were up eight points in screen trade.

Australia's S&P/ASX 200 was 0.6% higher though the index dipped a little after the Reserve Bank of Australia hiked its key cash rate by 25 basis points to 3.25%, becoming the first central bank among the Group of 20 nations to begin monetary tightening.

Regional financial and commodity plays traded mostly higher, after Goldman Sachs upgraded its view on large U.S. banks to Attractive from Neutral ahead of quarterly earnings.

Among regional financial stocks, Japan's Nomura Holdings added 3.7% and Daiwa Securities Group rose 2.1%. In Singapore, DBS gained 1.8% and in Hong Kong, Bank of China added 1.5%.

Most Australian banking plays traded off early highs after the RBA rate decision.

"I think it's good news if they're increasing rates because it shows growth is coming through domestically but the market, in its fragile state at the moment, would probably see that as a negative," said Justin Gallagher, head of Sydney sales trading at RBS.

Commonwealth Bank was flat after earlier trading up as much as 1.6%. National Australia Bank was down 0.2% after earlier rising as much as 2.1%. Westpac Banking added 1.8%.

Strength in commodities prices was helping regional resource plays. Australia's BHP Billiton was up 1.2% and Rio Tinto gained 2.1% while Newcrest Mining was up 2.4%. In Tokyo, Sumitomo Metal Mining added 4.6% and in Hong Kong, Jiangxi Copper gained 2.8% and Real Gold Mining added 6.9%.

In other markets, Singapore's Straits Times Index was up 1.2%, Malaysia's KLCI shed 0.1%, Philippine shares added 1.9%, Taiwan's Taiex gained 1.5% and Indonesian stocks rose 0.5%.

In Tokyo, Mazda Motor jumped 4.3%, bouncing after the shares tumbled about 20% over the past seven sessions. Investors were cheered after the company Monday said it expected a net loss of Y26 billion for the fiscal year ending March, from its previous expectation of a Y50 billion loss. The company also announced that it plans to raise about $1 billion, partly to develop technologies that will improve the fuel-efficiency of its cars.

Among exporters, Panasonic was down 0.5% and Canon lost 1.2%.

Korean technology stocks were higher, after Samsung Electronics said it now expects consolidated third-quarter sales of KRW36 trillion, compared with KRW30.3 trillion a year ago, and an operating profit of KRW4.1 trillion from KRW1.48 trillion a year earlier. Samsung Electronics was up 0.9% and LG Electronics gained 5.0%.

In foreign exchange markets, the Australian dollar surged to US$0.8832 from about US$0.8770 after the Reserve Bank of Australia hiked its key cash rate.

The New Zealand dollar was helped even higher by the RBA's decision, and touched a new 14-month high of US$0.7344.

The Kiwi was also helped by expectations of a strong milk powder auction later in the global day, said Mike Hollows, director of trading at HIFX in Auckland. He noted that the local unit also benefited from a broadly weaker U.S. dollar, noting some selling in the greenback against other majors because of an article in The Independent, citing Gulf Arab and Chinese banking sources in Hong Kong, that suggested Gulf states were planning to end trading oil in U.S. dollar terms, and shift the pricing instead to a basket of currencies.

The euro was at $1.4704 from $1.4651 in late New York trade on Monday, and at Y130.99 from Y131.19. The U.S. dollar was at Y89.09 from Y89.54.

Asian currencies were broadly higher, with suspected central bank intervention to support the greenback from South Korea and Taiwan authorities.

Japanese government bonds were supported by a stronger-than-expected auction of 10-year JGBs. The result suggested that demand for long-term bonds was very firm, said Mizuho Securities market analyst Masashi Shimominami. "Many investors expect long-term yields to extend their declines as the economic outlook remains gloomy, and they are eager to buy JGBs in a liquidity-driven market."

The lead December JGB futures contract rose 0.02 to 139.52 points. The 10-year cash JGB yield fell 1.5 basis points to 1.245%.

The London Metals Exchange three-month copper futures contract was at $6,020 per ton, up $105 from the London afternoon kerb. LME three-month aluminum was also higher, trading at $1,815 per ton, up $25.

The November Nymex crude oil futures contract was up 5 cents at $70.46 per barrel. Spot gold was at $1,016.40 per troy ounce, down 80 cents from the New York close.