Asian shares and the euro extended a rally into a second day today, as investors were buoyed by expectations that European policy makers will outline details of how they will leverage a bailout fund so as to avert contagion in sovereign debt markets.
MSCI's broadest index of Asia Pacific shares outside Japan rose 1.6 per cent, adding to yesterday's jump of more than 2 per cent. The index hit a seven-week low last Friday.
Japan's Nikkei closed up 2.3 per cent, moving further away from two-and-a-half year lows also hit last week.
US stocks ended a seven-session losing streak today, partly supported by robust holiday sales, helping to buoy some Asian markets with export exposures to the United States, such as Korea and Taiwan, while defensives and beaten-down energy and materials sectors pulled Hong Kong and Shanghai shares higher.
"Some positive sentiment hit the markets which, after a recent steep decline, were offering good valuations and encouraging temporary buy back," said Hirokazu Yuihama, senior strategist at Daiwa Capital Markets.
Asian markets largely shrugged off a French media report citing several sources as saying Standard & Poor's could change the outlook of France's top-notch rating to "negative" within the next 10 days, but European share markets were set to dip.
Financial spreadbetters expected Britain's FTSE 100 and Germany's DAX to open down 0.1 per cent, and France's CAC-40 to open down 0.4 per cent.
The euro inched up 0.3 per cent to $1.3364, after rising more than 1 per cent yesterday to a high of $1.3398. The dollar index measured against six key currencies slipped 0.3 per cent.
Commodities, a gauge for investor risk appetite, were steady after yesterday's rally, with gold inching up 0.1 per cent above $1,700 an ounce and oil steadying after a rise of more than $1 yesterday.
Germany and France are reportedly working on proposals for a more rapid fiscal integration in Europe ahead of a European Union summit on December 9th, but the European Central Bank has defied calls for a stepped-up role in helping resolve fiscal problems within the 17-member euro zone.
Concerns about the ability of the highly-indebted euro zone countries to pay off their ballooning public debt have made their sovereign bonds a prime target for market attacks, pushing yields to levels widely seen as unsustainable.
Market players were closely watching the outcome of this week's auctions, with up to nearly €19 billion in new bonds expected to be issued by Belgium, Italy, Spain and France.
Italy plans a €8 billion bond sale later today. Ten-year bond yields were stuck above 7 per cent, a level that forced Greece, Ireland and Portugal to seek international aid.
Tension in euro zone money market and banks' reluctance to lend to each other further intensified yesterday, with three-month Euribor rates, traditionally the main gauge of unsecured interbank euro lending and a mix of interest rate expectations and banks' appetite for lending, rising to 1.477 per cent from 1.475 per cent.
Reflecting global market strains, the Bank of Japan supplied dollars in market operations for the fourth time this month today, providing $100 million in an operation maturing in three months and $1 million maturing in a week.
Reuters
