Japan Stocks Turn Lower on Tankan; Oil Eases

Japanese stocks reversed earlier gains, dragged lower by steel makers after a weak business sentiment survey.

The dollar held steady against the yen after Bank of Japan's tankan survey of corporate sentiment showed a slight dip in business confidence but did little to alter market expectations about when the central bank might raise interest rates next.

Oil prices traded below $66 a barrel as the row between Iran and Britain reached a stalemate and as workers at a French oil hub ended a three-week-old strike.

European stocks are set to rise, supported by acquisition activity and a pause in the oil price rally, with investors waiting for key U.S. data in the shortened week to the Easter break.

Investors will watch the Institute of Supply Management's manufacturing index, which is expected to fall to 51.1 in March from 52.3 in February, for clues about progress of the U.S. economy.

Tokyo's Nikkei reversed earlier gains to close down 1.5 percent -- its lowest close since March 26.

The index was hit by falls in steel makers, such as Nippon Steel Corp. and its peers declined after Japan's tankan survey showed big steel firms were less upbeat about their business prospects.

"The market was up on expectations that new money would flow into the market as the new fiscal year started, but it struggled when not much buying kicked in," said Hiroyuki Fukunaga, chief strategist at the research division of Rakuten Securities. MSCI's broadest index of shares elsewhere in Asia was up 0.1 percent by 0606 GMT.

Stocks benchmarks in Hong Kong and Singapore rose 0.4 and 0.2 percent, respectively.

Gains in China's Baoshan Iron and Steel Co. after the company reported strong 2006 earnings helped drive the Shanghai Composite Index up 1.8 percent.

SEOUL UP ON TRADE PACT

South Korea's KOSPI index rose 0.5 percent to its highest close ni five weeks after the country agreed a free trade deal with the United States, raising the prospect of improving returns in a key export market.

The news drove shares in Hyundai Motor Co., South Korea's biggest auto maker, up 3.3 percent.

"If industries wake up and restructure and are reborn to compete more globally, that's good for the companies that survive and to their shareholders," said Thomas Choi, head of research at PCA Asset Management.

But shares in Australia fell 1.3 percent after stronger-than-expected domestic data fuelled speculation that the Australian central bank could raise interest rates this week.

The dollar stood at 117.69 yen at 0615 GMT, up slightly from around 117.75 yen before the tankan's release.

The euro was steady at 157.13 yen

NYMEX crude for May delivery was down 19 cents at $65.68 a barrel.

Gold traded around $663.4/663.8 an ounce from $663.70/664.70 late in New York on Friday, when it rose more than $2 an ounce, its safe haven status boosted by tensions between Iran and Britain and a weaker U.S. dollar.

The yield on the benchmark 10-year U.S. Treasury hovered around a one-month high as the market remained tilted towards selling ahead of U.S. manufacturing data due later in the session.