Monday, October 17, 2011

Asia shares up on hopes for Europe crisis plan

Asian shares rose on Monday and the euro held firm amid hopes that a crucial week for the euro zone crisis will see policymakers finally come up with a comprehensive plan to resolve the region's debt woes and recapitalise its banks.

Commodities were mostly higher on hopes that Europe will avoid a meltdown in the financial system and on signs that China, a key source of resources demand, is containing inflation and so more likely to avoid an economic "hard landing".

G20 finance chiefs at the weekend heaped pressure on euro zone leaders to get on top of the two-year-old crisis, throwing attention on to what is now being seen by markets as make-or-break European Union summit on Oct. 23.

"The market is growing more expectant of more aggressive measures from Europe aimed at solving its debt crisis," said Kim Young-june, a market analyst at SK Securities.

Japan's Nikkei share average rose 1.4 percent, while MSCI's broadest index of Asia Pacific shares outside Japan rose 0.8 percent.

U.S. stocks rose on Friday, with the S&P 500 up 1.7 percent, on optimism about Europe and after strong earnings from Google Inc. , as Wall Street shares notched up their first back-to-back weekly gains since early July.

The euro held firm after posting its biggest weekly gain in 9 months last week. The single currency traded around $1.3860 , steady on the day and well off a 9-month trough of $1.3144 set on Oct. 4.

If EU leaders fall short of the "grand plan" to address the region's sovereign debt and banking woes that markets are now expecting at their summit this weekend, the euro will quickly come under renewed pressure, traders warned.

Hopes of significant progress in Europe have also brought relief to credit markets, with spreads on the iTraxx Asia ex-Japan investment grade index tightening further on Monday. The index has not tightened by a dramatic 26 basis points over the past week.

In commodities markets, copper edged up 0.3 percent to $7,566 a tonne and oil was also higher, with Brent crude up 0.4 percent at $112.65 a barrel and U.S. crude up 0.7 percent at $87.39.

Gold was virtually unchanged at around $1,678 an ounce, after its biggest weekly gain since early September last week. ' Reuters


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