TOKYO (Nov 4): Asian shares rose and the euro steadied on Friday on hopes Greece will abandon a proposed referendum over a euro-zone bailout but investors remained cautious over a confidence vote later in the day in the Greek parliament.
Greece's abrupt call for a referendum, just days after a deal was struck to save the debt-stricken country from defaulting, sparked panic in global financial markets, prompting EU leaders to talk of a possible Greek exit from the euro to preserve the single currency.
Greek Prime Minister George Papandreou bowed to cabinet rebels and agreed to step down and make way for a negotiated coalition government if his Socialist lawmakers back him in a confidence vote on Friday, raising hopes for a political consensus on the EU rescue framework.
"The market regained some calm but uncertainty remains over the outcome of today's confidence vote," said Yuji Saito, director of the foreign exchange division at Credit Agricole Bank in Tokyo.
"Uncertainty at this point entails risks, as it means delays in the efforts (to resolve the debt crisis). There is also the outcome from the G20, so risk-on momentum isn't likely to gain."
MSCI's broadest index of Asia Pacific shares outside Japan rose 1.5 percent led by the materials sector which gained 3 percent as oil prices recovered.
Japan's Nikkei share opened up 1.4 percent.
Global stocks and crude oil rallied on Thursday on rising hopes Greece will abandon the referendum plan, which would reduce the chance of a disorderly default.
MSCI's all-country world index rose 1.4 percent and the FTSEurofirst 300 index of top European shares gained 1.9 percent on Thursday.
U.S. stocks also bounced on Thursday after the Institute for Supply Management said its services index eased to 52.9 in October from 53.0 the month before, showing the pace of growth in the vast U.S. services sector slowed to its lowest level since June as new orders declined.
But government data showed new claims for U.S. unemployment benefits fell below 400,000 last week for the first time in five weeks, suggesting modest improvement in the labor market.
Market sentiment was also supported by the European Central Bank's surprise rate cut of 25 basis points on Thursday, the first meeting under new President Mario Draghi. Draghi said the euro zone could enter a "mild recession" later this year.
"The ECB's surprise move to cut rates suggested it took a preemptive move as it forecast growth slowdown, which gave a positive surprise to the market," Saito said.
THe euro was up 0.1 percent against the dollar and held above $1.38 .
As optimism buoyed riskier assets, safe-haven appetite retreated, sending U.S. Treasury debt prices down on Thursday. The benchmark 10-year U.S. Treasury note fell 25/32 in price to yield 2.08 percent.
Conversely, Asian credit markets stabilised, with the spreads on the iTraxx Asia ex-Japan investment grade index narrowing sharply by 12 basis points early on Friday. The index is a gauge of investor risk appetite.
G20 leaders meeting in southern France will try to look beyond the Greek drama that has shaken their annual gathering and agree on measures that will convince markets the risk of further euro zone contagion can be stemmed.
On Friday, heads of state from the 20 major economies will focus on ways to ramp up the IMF's resources and build a financial firewall to protect vulnerable euro zone peripherals like Italy and Spain from a possible Greek default. - Reuters
Greece's abrupt call for a referendum, just days after a deal was struck to save the debt-stricken country from defaulting, sparked panic in global financial markets, prompting EU leaders to talk of a possible Greek exit from the euro to preserve the single currency.
Greek Prime Minister George Papandreou bowed to cabinet rebels and agreed to step down and make way for a negotiated coalition government if his Socialist lawmakers back him in a confidence vote on Friday, raising hopes for a political consensus on the EU rescue framework.
"The market regained some calm but uncertainty remains over the outcome of today's confidence vote," said Yuji Saito, director of the foreign exchange division at Credit Agricole Bank in Tokyo.
"Uncertainty at this point entails risks, as it means delays in the efforts (to resolve the debt crisis). There is also the outcome from the G20, so risk-on momentum isn't likely to gain."
MSCI's broadest index of Asia Pacific shares outside Japan rose 1.5 percent led by the materials sector which gained 3 percent as oil prices recovered.
Japan's Nikkei share opened up 1.4 percent.
Global stocks and crude oil rallied on Thursday on rising hopes Greece will abandon the referendum plan, which would reduce the chance of a disorderly default.
MSCI's all-country world index rose 1.4 percent and the FTSEurofirst 300 index of top European shares gained 1.9 percent on Thursday.
U.S. stocks also bounced on Thursday after the Institute for Supply Management said its services index eased to 52.9 in October from 53.0 the month before, showing the pace of growth in the vast U.S. services sector slowed to its lowest level since June as new orders declined.
But government data showed new claims for U.S. unemployment benefits fell below 400,000 last week for the first time in five weeks, suggesting modest improvement in the labor market.
Market sentiment was also supported by the European Central Bank's surprise rate cut of 25 basis points on Thursday, the first meeting under new President Mario Draghi. Draghi said the euro zone could enter a "mild recession" later this year.
"The ECB's surprise move to cut rates suggested it took a preemptive move as it forecast growth slowdown, which gave a positive surprise to the market," Saito said.
THe euro was up 0.1 percent against the dollar and held above $1.38 .
As optimism buoyed riskier assets, safe-haven appetite retreated, sending U.S. Treasury debt prices down on Thursday. The benchmark 10-year U.S. Treasury note fell 25/32 in price to yield 2.08 percent.
Conversely, Asian credit markets stabilised, with the spreads on the iTraxx Asia ex-Japan investment grade index narrowing sharply by 12 basis points early on Friday. The index is a gauge of investor risk appetite.
G20 leaders meeting in southern France will try to look beyond the Greek drama that has shaken their annual gathering and agree on measures that will convince markets the risk of further euro zone contagion can be stemmed.
On Friday, heads of state from the 20 major economies will focus on ways to ramp up the IMF's resources and build a financial firewall to protect vulnerable euro zone peripherals like Italy and Spain from a possible Greek default. - Reuters
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