GLOBAL MARKETS-Asian shares, commodities gain on relief over Spain

by on September 28, 2012 3:38 am BST

Thu Sep 27, 2012 11:38pm EDT

* MSCI Asia ex-Japan adds 0.7 pct, Chinese shares outperform

* Nikkei falls amid end-quarter adjustments, China worry

* Euro, Aussie, and commodities drift higher as dollar

* Spain’s economic reform and budget soothe sentiment

By Chikako Mogi

TOKYO, Sept 28 (Reuters) – Asian shares mostly rose on
Friday on optimism economic reform and budget plans unveiled by
Spain will help the debt-saddled nation manage its debt
imbalances, in a move seen as an effort to pre-empt the likely
conditions of international assistance.

Riskier currencies such as the Australian dollar, the euro
and commodities also drifted higher as the dollar remained

The MSCI index of Asia-Pacific shares outside Japan
rose 0.7 percent, extending Thursday’s sharp
gains triggered by a spike in Chinese shares as speculation of
further stimulus steps spread. Sentiment was buoyed by Spain’s
announcement on Thursday of a detailed timetable for economic
reform and a budget based mostly on sharp spending cuts rather
than tax hikes.

Madrid is talking to European Union authorities about the
terms of a possible aid package, which would pave the way for
initiating the European Central Bank’s bond-buying programme
aimed at easing the country’s borrowing strains.

“It’s a move in the right direction because at the very
least they have to meet the conditions for the ECB to buy their
bonds,” said Tetsuro Ii, CEO of Commons Asset Management.

Hong Kong and Shanghai shares led the
pan-Asian stock index again, rising 0.6 percent each, as hopes
simmered for China to take measures over the coming long holiday
to boost the economy and support its domestic stock markets.

The yen hit a two-week high against the dollar around 77.50
yen on Friday, after the dollar index measured
against a basket of currencies fell 0.4 percent on Thursday for
its biggest daily drop in two weeks.

“Risk is primed for a comeback, and the AUD (Australian
dollar) may be the biggest beneficiary,” Neal Gilbert, currency
strategist at GFT Forex in New Jersey, said in a note.

“If Asia is as satisfied with the Spanish Budget Plan as the
rest of the world, a run back up to resistance from last week at
1.0520 may be in order,” he said, referring to the Australian
dollar. The Aussie, widely seen as a gauge for investor
risk appetite, rose 0. 3 percent to $1.0466.

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

Shares in Australia, heavily reliant on resources
demand from China, inched up 0.2 percent, but were capped on
concerns over the economic weakness in the world’s
second-largest economy, with Fitch Ratings cutting its 2012
growth forecast for China from 8 percent to 7.8 percent on

“There are a lot of people out there who are very concerned
about whether or not the stimulus in China is real or coming
through,” said Damien Boey, an equity strategist at Credit

Japan’s Nikkei stock average bucked the rest of Asia
and eased 0.3 percent amid adjustments related to the end of the
fiscal first-half and concerns about falling revenues for local
companies in China, hit by recent anti-Japan protests.

The euro rose 0.2 percent to $1.2934, rebounding from
a two-week low of $1.2828 touched on Thursday.

Later on Friday, a stress test of Spain’s banking sector
will be released, which will reveal how much more money is
needed to recapitalise its banks. Moody’s latest credit rating
review is also expected this week.


Reflecting choppy market sentiment, the CBOE Volatility
index which measures volatility expected in the Standard
& Poor’s 500 index fell 11.7 percent on Thursday for its
sharpest daily decline in three weeks, just a day after the
index posted its biggest daily rise in 2-1/2 weeks.

Talk authorities would offer measures to prop up the wobbly
Chinese stock markets lifted the Shanghai Composite Index
up as much as 3 percent on Thursday, one day after the
index hit its lowest point since February 2009.

Sentiment also improved after China’s central bank injected
a record amount of liquidity into the money markets this week to
ease funding strains as China heads for a week-long holiday.

Following fresh monetary stimulus unveiled by the United
States and Japan this month, markets have retained expectations
for China to cut interest rates to spur growth, as weakening
demand in China has damaged global economies and weighed on
investor sentiment.

Data on Friday showed Japan’s industrial output fell more
than expected in August as the world’s third-largest economy was
held back by a strong yen, confidence-sapping euro zone debt
crisis and a slowdown in its top export market China.

Beijing approved about $150 billion-worth of infrastructure
projects this month.

But China’s biggest listed steelmaker, Baoshan Iron & Steel
Co, which has suspended output at a loss-making
plant, expressed doubt that attempts to prop up the slowing
economy would revive demand in the world’s biggest market for
the metal. A slump in iron ore prices had triggered a broad
sell-off in riskier assets.

U.S. crude rose 0.5 percent to $92.29 a barrel and
Brent also rose 0.5 percent to $112.51.