Asian stocks are set for their best gains in over two weeks after a bullish company forecast fuelled optimism about the coming US earnings season and underpinned a slow return by investors to riskier assets.
The MSCI index of Asia Pacific shares outside Japan rose 2.1 per cent to its highest since June 29, and looked set for its best one-day performance since June 21, led by materials and financial shares.
Further good news came with the release of Australian employment figures that surged well above forecasts, promising to boost household incomes and spending and pushing the Australian dollar to its highest since late June.
US financial company State Street Corp said on Wednesday that quarterly earnings would far exceed expectations, providing a lifeline to investors after several weeks of dismal economic reports and propelling Wall Street to its biggest one-day gain in six weeks.
Japan's benchmark Nikkei average rose 2.7 per cent to 9,525 points, and appeared to be on target for its best one-day rise in over a month, with exporters especially strong performers.
But market watchers were wary about whether the gains would last, noting that the Nikkei was finding it difficult to extend its gains much past 9500.
Recent attempts at rallies in many markets have quickly succumbed to profit taking, highlighting weak investor confidence and concerns that the global economic recovery may be losing momentum.
Strong company earnings reports and sales forecasts in coming weeks could soothe some of those fears.
"There are probably a lot of individual investors who have been waiting for a day like today to lock in profits," said Hiroaki Osakabe, a fund manager at Chibagin Asset Management.
"The 9500 level turned into resistance several times during June, so this could be one good level (for selling)."
But others thought the rally might have further to go, and even Osakabe acknowledged that more short-covering could emerge after the Nikkei was pushed to a seven-month low on Tuesday.
"It could easily be viewed as a bounce from an oversold market in equities and risk appetite, and most people will see it in that light," said Greg Gibbs, a currency strategist at Royal Bank of Scotland in Sydney.
"But give it some time. They won't be immediately trying to sell it down," he said, referring to the rally in riskier assets.
The euro climbed to a two-month high above $US1.2665 and rose as far as $US1.2688 on electronic trading platform EBS, breaking above resistance at $US1.2673 that had been seen as a hurdle to further gains, but later fell back.
Most analysts in a Reuters poll believe it will stay weak against the US dollar over the coming year as much of the euro zone struggles to reduce debt levels.
Crude oil surged past $US75 a barrel as earnings euphoria boosted shares, reinforcing overnight gains triggered by an industry report showing US crude inventories plunged last week. By midday it had pared gains to around 0.7 per cent and traded around $US74.60 a barrel.
Gold extended its rebound, with spot gold rising to around $US1205 an ounce.
Reuters