Tokyo's benchmark Nkkei average shot up more than three per cent as traders and investors rode a global stock rally on their return from Japan's "Golden Week" holidays. The benchmark Nikkei 225 average ended up 3.59 per cent or 599.08 points at 17,300.61, the highest close since October 24, 1997. "The timing of the overseas stock rally was perfect because the Tokyo market had consolidated enough before the holiday," said Mamoru Shimode, a strategist at Deutsche Securities Ltd. He said the Nikkei average was likely to head higher to around 17,500, where it would probably be seen by many as overvalued enough to induce corrective sales.

On Wednesday, the Dow Jones Industrial Average continued to extend gains,closing 69.30 points or 0.64 per cent higher at 10,955.41. The Dow's recent winning streak buoyed stocks elsewhere in Asia and Europe during Tokyo's holidays. The Japanese stock market was closed for the weekend and the Golden Week holiday from May 1 to May 5.

Singapore's key index hit a fresh 26-month high at the opening to come within a stone's throw of 2,000 points, but later retreated on profit-taking. The Straits Times Index finished up 9.46 points at 1,974.64. South Korea's shares soared on comments by the country's central bank govenor that interest rates were not likely to rise immediately. Seoul's Composite Stock Price Index leapt 5.11 per cent to 810.54.

Hong Kong and Australia bucked the regional trend. Hong Kong's Hang Seng Index ended weaker but off session lows, falling 0.12 per cent to 13,570 as investors took profits after a brief rally to 13,719, the highest level in more than 18 months.

"The blue chip sell-off was triggered by concerns over the direction in US interest rates," saidAlex Tang, research director at Core Pacific-Yamaichi Securities. "There's concern about how it will affect the Dow. I think most investors are looking for an excuse to sell stocks off a bit," he said.

Australia's market lost ground as weakness in industrial shares outweighed gains in resources stocks. The All Ordinaries index ended down 0.1 per cent at 3,038.6. Manila stocks barrelled past 2,500 resistance to finish at a new 20-month high, fuelled by foreign fund inflows and the country's improving economic outlook. The 33-share main index rallied 2.83 per cent to 2,516.83 points.

Thai shares ended up one per cent on last-minute buying but were down from earlier highs inspired by Standard & Poor's move on Wednesday to revise Thailand's credit rating outlook to stable from negative. The index ended up 1.37 per cent at 512.69. Profit-taking in Malaysia after recent sharp gains pulled Kuala Lumpur's key index off intra-day highs, but optimism over the economy kept blue-chip stocks in the black at the close.The benchmark Composite Index rose 0.98 per cent to 717.58, off a peak of 734.07, its highest level since March 1998.

Taiwan stocks flirted with a nine-month high but succumbed to late profit-taking to end at 7,560.05 points, down 0.16 per cent. New Zealand shares ended firmer, helped by gains in forestry shares.