Shares buoyed by easing worries over Spanish debt

TOKYO (Reuters) - Asian shares rose on Wednesday as firm demand at Spanish debt sales, positive U.S. corporate earnings and an improvement in a key German sentiment survey boosted investor confidence in riskier assets.

MSCI's broadest index of Asia Pacific shares outside Japan rose 0.9 percent on Wednesday, led by Australian shares which charged to a two-week high, following a rally in European and U.S. equities the previous day that saw Wall Street stocks scoring their biggest gain in a month.

Japan's Nikkei average jumped 1.7 percent.

"There is a sense of relief after markets cleared one hurdle, with Spanish yields falling after successful short-term debt sales," said Hirokazu Yuihama, a senior strategist at Daiwa Securities in Tokyo.

"Markets are undergoing a consolidation phase after a strong rally earlier in the year, and if Spain's bond auctions on Thursday pass without a problem, investors will likely become more committed to risk-taking," he said.

Spain sold a more-than-planned 3.2 billion euros ($4.21 billion) of 12- and 18-month bills on Tuesday due to good demand from domestic banks, easing some concerns about the country's refinancing ability.

Yields on 10-year Spanish government bonds fell back below the 6 percent level reached on Monday, when concerns over the banking system, deficit and recession flared up. Spain faces a far more significant challenge on Thursday, with an auction of two- and 10-year bonds.

The euro erased earlier gains to hold steady around $1.3110, but recovering from a two-month low near $1.2994 hit on Monday and returning to the middle its recent trading range.

As the dollar firmed against a basket of major currencies, riskier currencies such as the Australian dollar also pared earlier gains. The Aussie stood just below $1.04.

Asian credit markets firmed, with the spread on the iTraxx Asia ex-Japan investment-grade index tightening by 6 basis points.

IMF CAUTIOUSLY OPTIMISTIC

Other news that helped turn around bearish sentiment on Tuesday included a German ZEW survey of analyst and investor confidence rising unexpectedly in April to its highest level since June 2010, suggesting Europe's largest economy may be recovering from a weak spell.

The International Monetary Fund offered a cautiously optimistic view on global growth, which it said was slowly improving as the U.S. recovery gains traction and dangers from Europe recede. But it said on Tuesday risks remained high and the situation was very fragile.

While the IMF said it saw Spain growing 0.1 percent in 2013 after forecasting in January a 0.3 percent contraction for next year, the fund also warned it did not see Spain meeting its deficit goals this year or next.

Europe is seeking to bolster its fragile safety net as highly indebted euro zone nations struggle to implement fiscal austerity measures, with differences developing over the allocation of funds from the euro zone's rescue fund.

The Sueddeutsche Zeitung daily said on Wednesday several euro zone countries and some officials of the European Central Bank were pressing for the European Financial Stability Facility to be able to lend directly to troubled banks without going through the government of the country concerned.

But the main donor nations to the EFSF, notably Germany, remained strongly opposed to any measures they regard as relaxing pressure on euro zone governments to tackle structural problems.

The IMF appeared to be inching toward a deal on increasing its financial firepower on Tuesday, with Japan, Sweden and Denmark committing a total of $77 billion to help contain the euro zone's debt crisis.

The deal may not be fully fleshed out at a meeting later this week of global finance ministers in Washington, but it is possible that the G20 developed and emerging nations could agree on the amount of funds needed and leave it to a leaders' summit in June to hammer out details.

Commodities were capped, with U.S. crude futures inching down 0.1 percent to $104.15 a barrel and Brent crude easing 0.2 percent to $118.55 a barrel. Copper extended gains, adding 0.2 percent to $8,020 a metric tonne.

"Commodities are pressured by delayed profit taking which didn't occur last month, but expectations for global monetary easing to underpin growth are keeping support firm," said Naohiro Niimura, a partner at research and consulting firm Market Risk Advisory Co. ($1 = 0.7610 euros)

(Editing by Alex Richardson)

WhatsAppFacebookTwitterLinkedinBeloudBluesky