ASIA MARKETS: Financials Drive Sydney As Tokyo Comes Off Lows

Asian markets were mixed Monday, with Chinese shares in Shanghai dropping on fears of central-bank policy-tightening after data showed that inflation accelerated in April, while Australian shares rallied on financials amid hopes of industry consolidation.

Japanese stocks, which dropped earlier in the day as exporters such as Toyota Motor Corp., came off their lows in the afternoon on a pullback in the yen and in crude-oil prices.

Australian shares, which defied the weak trend in the regional markets to notch gains last week, extended their rally on financials such as National Australia Bank after Westpac Banking Corp. said it was in merger talks with St. George Bank.

"The Australian economy is looking south, but the market is looking ahead and anticipating lower interest rates next year," said Michael Heffernan, senior client adviser at Austock Stockbroking in Melbourne.

Heffernan said word about the Westpac-St. George Bank takeover talks "fired up" banking stocks.

Japan's Nikkei 225 Average rose 0.6% to 13,734.30, after dropping as low as 13,540.68 earlier in the day. The broader Topix index was little changed at 1, 341.84.

China's Shanghai Composite gave up more than 2%, before recovering some losses, after the government reported that the consumer price index jumped 8.5% in April from the year-ago month on soaring food prices, before recovering some losses. The index was recently down 0.5% at 3,593.96.

Singapore's Straits Times Index rose 0.3% to 3,170.06 and Taiwan's Weighted index was little changed at 8,788.97.

Australia's S&P/ASX 200 rose 0.5% to 5,801.60 and New Zealand's NZX 50 index advanced 0.6% to 3,620.99.

South Korean and Hong Kong markets were closed for a holiday.

Movers

In Sydney, trading in shares of Westpac Banking Corp. and St. George Bank ere halted after Westpac said the lenders were in merger discussions.

Shares of other banking stocks rose sharply, with National Australia Bank surging 5.1% and Commonwealth Bank of Australia gaining 3.3%.

Among Japanese exporters, shares of Sony Corp. (SNE) climbed 1.5% and Nikon Corp. added 1.1% in the afternoon, as the U.S. dollar recovered against the yen.

In Asian currency trading, the U.S. dollar bought 103.46 yen. In New York, the dollar traded for 102.95 yen late Friday and 103.88 yen late Thursday.

Energy producers retreated on a pullback in crude-oil prices, with Woodside Petroleum (WOPEY) falling 0.6% in Sydney and PetroChina Co. (PTR) dropping 1.2% in Shanghai.

Crude oil for June delivery fell as much as 39 cents to $125.57 a barrel in electronic trading, after rising as high as $126.20 earlier in the day. The contract finished $2.27 higher at $125.96 a barrel in regular trading on the New York Mercantile Exchange Friday.

On Wall Street, the Dow Jones Industrial Average (DJI) lost 120.9 points to 12,745.88 and the S&P 500 index (SPX) shed 9.4 points to 1,388.28, while the Nasdaq Composite (RIXF) dropped 5.72 points to 2,455.52.