Asian shares near six-week high on oil, Fed expectations

By Hideyuki Sano

TOKYO (Reuters) - Asian shares held near six-week highs on Wednesday, on a brightening outlook in the energy sector and hopes that the U.S. Federal Reserve will not raise interest rates in the coming months after a disappointingly weak U.S. jobs report.

MSCI's broadest index of Asia-Pacific shares outside Japan was flat after hitting a near six-week high the previous day. Japan's Nikkei <.N225> was also flat.

On Wall Street, the U.S. S&P 500 Index rose 0.1 percent to 2,112, less than 20 points away from its record closing high marked in May last year.

The gains were led by 2.1 percent gains in energy shares <.SPNY> as oil prices jumped more than 1 percent to hit 2016 highs on expectations of domestic stockpile draws and worries about supply shortfalls from attacks on Nigeria's oil industry.

A report by trade group American Petroleum Institute (API), released after Tuesday's close showed a crude draw of 3.6 million barrels, larger than expectations of 2.7 million barrels, supporting the market.

U.S. crude futures last traded at $50.39 per barrel, near its Tuesday high of $50.53, a level last seen in October.

Global benchmark Brent futures also hit an eight-month high of $51.54 per barrel and last stood at $51.47.

Investors further trimmed expectations of Fed rate hikes as they assessed Friday's employment report that showed new hires sharply dropped in May.

Data published on Tuesday confirmed U.S. nonfarm productivity fell in the first quarter on a surge in labour-related costs, suggesting companies may have had to slow hiring after their hiring earlier this year outpaced their revenue growth.

"Output is not increasing as much as an increase in employment, hence we have a fall in productivity. If employment stops increasing and we still have no growth in productivity, that would be a worrying sign," said Shuji Shirota, head of macroeconomic strategy at HSBC Securities.

The 10-year U.S. Treasuries yield fell back to 1.713 percent , testing strong support at around 1.70 percent.

In Europe, German bond yields hit a record low of 0.045 percent on Tuesday as investors sought a safe haven ahead of Britain's referendum on EU membership.

The British pound was off Monday's three-week low but remained volatile. It traded at $1.4541 , compared with Monday's low of $1.4352.

The dollar also licked its wounds near four-week lows after the job data quashed expectations of a Fed rate hike in the next couple of months.

The dollar index <=USD> stood at 93.862, just above Monday's low of 93.745 and around 1.8 percent below its levels just before the payrolls data.

The euro changed hands at $1.1358 while the yen stood at 107.28 per dollar.

In Asia, Chinese trade data due later on Wednesday is the next big focus for markets. [ECONCN]

(Editing by Jacqueline Wong)