Asian shares higher after U.S. data, Citi results

TOKYO (Reuters) - Asian shares rose on Tuesday after rallies in U.S. stocks and positive U.S. data cheered investor mood, with hopes for some progress in the euro zone debt crisis also helping to underpin sentiment.

The MSCI index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> inched up 0.4 percent, with Australian shares <.AXJO> rising 0.6 percent and South Korean shares <.KS11> opening 0.9 percent higher.

Japan's Nikkei average <.N225> opened up 0.7 percent. <.T>

U.S. stocks climbed on Monday after earnings from Citigroup Inc , the third-largest U.S. bank, and retail sales strongly beat expectations. An earnings report from Goldman Sachs is scheduled on Tuesday.

"Citigroup's earnings yesterday reinforced the confidence in the health of big firms, and the markets responded. U.S. investors had been extremely cautious, but with the stream of good data, such as in retail sales data and corporate earnings, fears seem eased for now," said Ryoo Yong-suk, an analyst at Hyundai Securities.

There was some caution, however, before China publishes third-quarter gross domestic product data on Thursday, [ID:nL3E8L8641] while Chinese corporate profits show scant sign of a second-half recovery.

Analysts cut earnings estimates in September by the most in 2-1/2 years, a red flag for investors who expect the world's second biggest economy to start picking up soon.

European equities edged higher on Monday on expectations Spain is moving closer to asking for a bailout and news that Greece hopes to agree a new austerity package, seeking to bridge the gap with its lenders at an European Union leaders' meeting on Thursday and Friday, although officials said talks would most likely not be completed at the EU summit.

Greek bond yields fell to their lowest since August 2011 on Monday, as investors scaled back bets the country will leave the euro zone.

The euro was up 0.1 percent at $1.2966, confined to recent ranges, as investors wait for the clarity on the timing of bailouts for struggling Spain and Greece.

"Spain will be the focus in the very near term. It appears increasingly unlikely that the October 18-19 summit will deliver a formal bailout request for Spain," Barclays Capital said in a research note. "We continue to see volatility in EUR as being too low, given the risks."

U.S. crude futures were down 0.2 percent at $91.69 a barrel and Brent was down 0.1 percent at $115.72.

Traders said momentum is gaining for the dollar to test its upside against the yen. The dollar was up 0.2 percent at 78.75 yen.

With the dollar now near the top of the Ichimoku cloud at 78.88-78.90, a break above that level could pave the way for the currency to hit a key technical level of its 200-day moving average which currently stood at 79.37 yen, said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo.

Investors will likely focus on the second U.S. presidential debate with Republican candidate Mitt Romney and President Barack Obama, slated for Tuesday at 9 p.m. EDT (0100 Wednesday GMT) in Hempstead, New York. Romney has seen a surge in opinion polls and voter enthusiasm since his strong performance in the first debate on October 3.

"If Romney gathers further momentum, stocks may fall and may benefit the dollar as risk appetite recedes," Saito said, adding that markets perceive Romney as against extending quantitative easing, which also weighed on stocks.

Some traders said speculation about Japanese mobile operator Softbank Corp <9984.T> tapping markets for financing its deal is supporting the dollar/yen.

Softbank said on Monday it will buy about 70 percent of Sprint Nextel Corp , the third-largest U.S. carrier, for $20.1 billion - the most a Japanese firm has spent on an overseas acquisition.

(Additional reporting by Somang Yang in Seoul; Editing by Eric Meijer)