Asian shares rise, euro steadier but pressure remains

TOKYO (Reuters) - Asian shares rose to their highest level in more than a month on Wednesday after the S&P 500 closed at a record high overnight, with the cheer expected to carry over into Europe on heightened speculation of more European Central Bank stimulus next month.

Spreadbetters predicted Britain's FTSE 100 <.FTSE> to edge down by 4 points, or 0.1 percent; Germany's DAX <.GDAXI> was seen up by 13-15 points, or 0.1 percent; while France's CAC 40 <.FCHI> was seen up by 1 point.

"We are calling the major bourses firmer with U.S. markets remaining at record highs," IG strategist Stan Shamu said in a note to clients.

MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> added 0.8 percent, after earlier hitting its highest level since April 10.

Hong Kong shares <.HSI> were up more than 1 percent as investors snapped up property and banking stocks after China's central bank urged mainland banks to speed up the granting of home loans.

Indonesian shares <.JKSE> rose 0.9 percent to their highest levels in nearly a year after Jakarta Governor Joko "Jokowi" Widodo boosted his chances in the July presidential election by securing the support of the country's second-largest political party.

Japan's Nikkei <.N225> bucked the trend, slipping about 0.1 percent and moving away from the previous session's 1-1/2-week high as investors took profits.

A weaker-than-expected U.S. retail sales report on Tuesday did little to change views the economy was poised for faster growth this quarter, and that the Federal Reserve will continue paring its stimulus.

"The U.S. tapering is still going on and it looks like the U.S. economy is still going strong, meaning people in emerging Asia are taking a cautious view," said Kyoya Okazawa, head of global equities and commodity derivatives at BNP Paribas in Tokyo.

Investors were also wary of developments in the ongoing crisis in the Ukraine, where pro-Russian separatists ambushed Ukrainian troops on Tuesday, killing seven.

On Wall Street overnight, U.S. stocks ended flat. The retail sales figures dented the dollar only slightly and the S&P 500 <.SPX> managed to eke out its 10th record closing high of the year after the release.

EURO FUNDING CARRY TRADES

In contrast with the Fed's tapering, the likelihood of easing action increased in the euro zone. The Bundesbank is ready to support ECB policy steps if they are warranted and this stance is not new, two Bundesbank sources said on Tuesday.

A weak German ZEW survey of investor sentiment lent credence to the view that the ECB has reason to take further action next month.

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German ZEW graphic: http://link.reuters.com/cag54s

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The euro last traded at $1.3717, up about 0.1 percent on the day, after it dropped as low as $1.3688 on Tuesday. A break below the April 4 trough of $1.3672 would take the single currency back to levels not seen since late February.

"Euro will remain offered on rallies into the June meeting," said Jeffrey Halley, FX trader for Saxo Capital Markets in Singapore, referring to the ECB's policy meeting next month.

"It has become the carry trade funding currency of choice, which has added to the selling pressure," he added, describing trades in which investors borrow funds in lower-yielding currencies to purchase higher-yielding assets.

The pressure on the euro helped support the dollar index <.DXY>, which was down about 0.1 percent on the day at 80.039, but remained not far from Tuesday's five-week high of 80.180.

Against its Japanese counterpart, the dollar edged down about 0.1 percent to 102.13 yen, after rising as high as 102.35 yen on Tuesday, its highest since May 2.

In commodities trading, U.S. crude added about 0.4 percent to $102.04 a barrel, extending Tuesday's two-week highs hit on expectations that weekly inventory reports will show record-low stockpiles.

Spot gold inched up to $1,294.50 an ounce.

(Additional reporting by Masayuki Kitano in Singapore; Editing by Shri Navaratnam, Eric Meijer and Simon Cameron-Moore)

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