GLOBAL MARKETS-Asian shares rebound, U.S.-China tensions overshadow economic optimism

* Asian shares rebound from 3-month lows
* Economic optimism countered by worries about China-U.S.
tensions
* Euro/dollar hits lowest since Nov on divergent health
conditions

By Hideyuki Sano
TOKYO, March 26 (Reuters) - Asian shares bounced back from a
three-month low on Friday thanks to a late-day rally on Wall
Street as optimism about the global economic recovery was
overshadowed by rising tensions between the West and China.
MSCI's ex-Japan Asia index .MIAPJ0000PUS rose 0.37% after
hitting a near three-month low on Thursday, while the Shanghai
Composite Index .SSEC gained 0.78%, snapping a three-day
losing streak.
"Recent falls in Chinese shares have been worrying but
there's no change in the fact the Chinese economy is
recovering," said Yasutada Suzuki, head of emerging market
investment at Sumitomo Mitsui Bank.
On Thursday, Chinese shares fell near to a three-month low
hit earlier in the month. The European Union joined Washington's
allies this week in imposing sanctions on officials in China's
Xinjiang region over allegations of human rights abuses,
prompting retaliatory sanctions from Beijing. "All the sanctions so far have been largely symbolic and
should have little economic impact. But the Sino-U.S.
confrontation is affecting market sentiment. It could take some
time for them to come to any compromise," Suzuki added.
Japan's Nikkei .N225 rose 0.89% after Wall Street shares
staged a rally, driven by cheap, cyclical stocks that have been
battered by the pandemic.
The Dow Jones Industrial Average .DJI rose 0.62% and the
S&P 500 .SPX gained 0.52% while the Nasdaq Composite .IXIC
added just 0.12%.
Analysts said trading was being driven more by an
end-of-quarter rebalancing of investment portfolios by
institutional investors rather than news flow, though they noted
overnight headlines were mostly supportive for stocks.
U.S. Labor Department data showed claims for unemployment
benefits dropped to a one-year low last week, a sign that the
U.S. economy is on the verge of stronger growth as the public
health situation improves. In his first formal news conference, U.S. President Joe
Biden said that he would double his administration's vaccination
rollout plan after reaching the previous goal of 100 million
shots 42 days ahead of schedule. But while improvement in the U.S. health crisis has
underpinned risk appetite globally, investors are increasingly
alarmed by a divergence in health conditions.
"Vaccination in continental Europe is falling behind the
schedule. Relative to the U.S., economic reopenings will likely
be delayed as some countries are forced to impose lockdowns,"
said Soichiro Matsumoto, chief investment officer, Japan, at
Credit Suisse's private banking unit in Tokyo.
That put pressure on the euro, which licked its wounds at
$1.1780 EUR= after falling as low as $1.1762 overnight, its
lowest levels since November.
The dollar also rose to 109.17 yen JPY= , within a striking
distance from last week's nine-month high of 109.365 yen.
The index of the U.S. currency =USD stood near its highest
level since mid-November, having gained 2.0% so far this month.
"The dollar is absolutely critical," said James Athey,
investment director at Aberdeen Standard Investments in London.
"If the dollar starts rallying, that becomes a problem. It
means commodity weakness and emerging market weakness and it
starts to provide a disinflationary countervailing narrative."
Oil prices rebounded a tad from a 4% drop on Thursday,
though they are on course for their third straight week of
losses on worries about a further reduction in demand. O/R
In addition to Europe, major developing economies such as
Brazil and India are also struggling with a resurgence in
COVID-19 cases.
The market still drew some support from concerns about
supply disruption as a stranded container ship in the Suez Canal
may block the vital shipping lane for weeks. U.S. crude CLc1 was last up 0.99% at $59.14 per barrel and
Brent LCOc1 was at $62.44, up 0.79%.

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