By Chikako Mogi
TOKYO, Jan 29 (Reuters) - Asian shares rose on Tuesday as
recent selling drew bargain hunters, but investors were cautious
ahead of more U.S. economic reports and a Federal Reserve policy
decision later in the week that may offer clues to the Fed's
The MSCI's broadest index of Asia-Pacific shares outside
Japan advanced 0.7 percent to snap a four-day
losing streak, led by a 1.1 percent jump in Australian shares to a fresh 21-month high on gains in financials shares.
South Korean shares, which slumped to an 8-week low
on Monday, rebounded 0.8 percent.
Japan's Nikkei stock average reversed earlier
declines and rose 0.6 percent, buoyed by optimism over earnings
of major banks. It briefly touched a fresh 32-month high above
11,000 on Monday.
The benchmark Standard & Poor's 500 Index eased
slightly on Monday after an eight-day winning run but held above
1,500 points, after closing above that level on Friday for the
first time in more than five years.
Risk appetite has been improving overall with U.S. earnings
generally solid. A rise in a gauge of planned U.S. business
spending in December added to a recent run of positive global
economic data, along with signs of easing financial stress in
the euro zone. Euro zone blue chips touched fresh 18-month peaks
More solid U.S. growth indicators would, however, fuel
speculation the Fed may consider pulling back on aggressive
easing stimulus. The Fed ends a two-day policy meeting on
Wednesday. The first estimate of U.S. fourth-quarter gross
domestic product also will be released on Wednesday, followed by
non-farm payrolls on Friday.
'Ahead of key events, markets are likely to stay in ranges.
But with yields on U.S. Treasury and German government bonds
inching higher, one might say investors may be shifting funds to
riskier assets from safe-havens,' said Yuji Saito, director of
foreign exchange at Credit Agricole in Tokyo.
'That's part of the reason why the euro has stayed firm,' he
Saito said while a rise in U.S. yields underpins the dollar
against the yen, they were likely to be capped with end-month
selling from exporters and options lined up between 90.50 and
The benchmark U.S. 10-year note yield briefly
pierced 2 percent on Monday for the first time since last April,
and inched up 1 basis point (bps) in Asia from New York close.
The 10-year Japanese government bond yield also
Naka Matsuzawa, fixed income strategist at Nomura
Securities, said in a research that 5-year Treasuries have sold
off about 10 bps over the last two days and breached 0.80
percent that has served as a support since April 2012, a
sell-off which 'would not have occurred unless expectations of
an economic recovery have gained ground to the extent that the
monetary policy outlook begins to change.'
'The market is aware that risks are toward more hawkish FOMC
statements in the future rather than dovish ones,' considering a
pick-up in the U.S. economic recovery and stock market rally, as
well as the underlying global risk-on trend, he said.
YEN SELLING PAUSES
Yen selling paused, helping to bolster the benchmark South
Korean stock index which is vulnerable to exchange rate swings
as exporters lead market capitalisation.
The dollar fell 0.1 percent to 90.78 yen after
touching 91.32 on Monday, its highest level since June 2010,
while the euro recouped earlier losses against the yen
to steady around 122.14 yen after hitting 122.91 on Monday, its
highest point since April.
The euro steadied against the dollar at $1.3456.
The pound fell to $1.5687 GBP=D4, near its lowest since
August, in part because of comments from incoming Bank of
England Governor Mark Carney that there was still scope for
monetary policy to do more in the developed world.
'The prospect of more activist monetary policy is not
exactly an encouraging one for GBP, certainly not as it comes on
top of a host of other negative developments - an economy that
is triple-dipping, a government that is struggling to cut its
deficit, and soul-searching about the UK's role within the EU,'
wrote analysts at JPMorgan in a note.
But a more positive global growth outlook underpinned
U.S. crude rose 0.2 percent to $96.67 a barrel and
Brent inched up 0.1 percent to $113.54.
London copper gained 0.2 percent to $8,065.50 a
Gold inched up 0.3 percent to $1,659.66 an ounce but
was capped by receding investor appetitie for safe-haven assets.
(Editing by Eric Meijer & Kim Coghill)
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