Published on Wed, Dec 21, 2011 at 08:52 | Source : Reuters
TOKYO (Reuters) - Asian
stocks and the euro rose on Wednesday after upbeat U.S. and German data
and strong demand for Spanish debt tempered risk-aversion, with
investors' focus turning to a European Central Bank tender as a gauge
for euro zone funding strains.
MSCI's broadest index of Asia
Pacific shares outside Japan climbed 2.5 percent to a one-week high,
recouping all of its losses from Monday, when news of the death of North
Korean leader Kim Jong-il raised fears of regional instability and
triggered a broad sell-off in riskier assets.
The risk-sensitive
materials sector <.MIAPJMT00PUS> was among the best performers,
rising more than 3 percent, while Taiwan led the pack with a 4.3 percent
rally, as the government authorised a state fund to step in and support
prices.
"Several supportive factors temporarily relieved concerns
that the euro zone debt crisis may deteriorate, but they are merely
providing a one-off floor, with a real turnaround still nowhere near in
sight," said Hirokazu Yuihama, senior strategist at Daiwa Capital
Markets.
Industrial commodities such as oil and copper extended
gains after data on Tuesday showing German business morale rose sharply
and a recovery in U.S. housing markets, pulling up commodities-linked
currencies such as the Australian dollar, often used to test risk
appetite, which rose 0.6 percent.
U.S. crude futures rose $1 to
above $98 a barrel and three-month copper on the London Metal Exchange
was up 0.2 percent at $7,427 a tonne.
Gold
hit a one-week high on the back of an easing dollar, which fell 0.3
percent against a basket of six major currencies. The euro added to
Tuesday's 1 percent gain, rising 0.3 percent to around $1.3121, inching
closer to a one-week high of $1.3132 touched on Tuesday.
The Nikkei stock average increased 1.4 percent, following a rally in global and U.S. stocks on Tuesday.
Global stocks climbed 2.3 percent for their strongest gains in three weeks.
EUROPE FUNDING STRAINS
Strong
demand for 3- and 6-month Spanish Treasury bills on Tuesday heightened
expectations for the ECB's first ever three-year tender to be conducted
later on Wednesday, aimed at easing interbank lending strains.
"A
significant uptake is all but guaranteed and that's something that could
continue this 'risk-on' (mood)", said Robert Rennie, chief currency
strategist at Westpac in Sydney.
A plunge in Spanish treasury bill
yields from a month ago eased fears that the borrowing costs for
highly-indebted countries would remain extremely high as concerns
persist over slow progress in resolving the euro zone debt crisis.
Sources
reported more than 10 Italian banks, including major lenders, were
looking to apply for the ECB loans by using state-guaranteed bonds as
collateral.
But Rennie warned: "That optimism will quickly fizzle out as the ECB is still a long way from embracing quantitative easing."
Analysts
say the long-term ECB loans will lower the cost for euro zone banks to
borrow euros in the open market, but won't reduce their dollar funding
costs.
The benchmark London interbank offered rate for three-month
dollars rose on Tuesday to 0.56975 percent, the highest level since
July 2009.
Hopes banks will use the borrowed money from the ECB to
purchase high-yielding debt lowered 10-year Italian and Spanish
government bond yields to 6.632 percent and 5.127 percent respectively,
further away from the levels above 7 percent that were widely seen as
unsustainable.
But it was more likely that the banks would use the
funds to repay their own debts as they strive to get rid of bad assets
and improve their balance sheets amid strong regulatory pressures to
beef up their core capital.
Fading risk aversion helped improve
sentiment in Asian credit markets, with spreads on the iTraxx Asia
ex-Japan investment grade index narrowing by 4 basis points on
Wednesday.
Bank of Japan data on Wednesday underscored how
investors fled to safety in the third quarter, when European leaders
faced intense market pressures to resolve the crisis. Foreign holdings
of Japanese government bonds in the period posted a record year-on-year
growth of 30.7 percent to 76 trillion yen.
(Additional reporting by Cecile Lefort in Sydney; Editing by Alex Richardson)
