Tokyo: Asian shares rose on Wednesday as strong US earnings reports brightened investor mood, while the euro hit a one-month high against the dollar as Spain dodged a bullet when Moody’s Investor Service kept Madrid’s investment grade rating.
US stocks rose on Tuesday as big-name companies reported stronger-than-expected earnings, with Johnson & Johnson and UnitedHealth Group both increasing their full-year profit forecasts while Goldman Sachs raised its dividend.
Risk tolerance grew on talk of European Union aid for Spain, driving down safe-haven US Treasury prices and weighing on the dollar index on Tuesday.
The index, measured against a basket of six key currencies, fell to a 1-1/2 week low early on Wednesday. A weaker dollar in turn helped underpin dollar-based commodities.
The MSCI index of Asia-Pacific shares outside Japan was up 0.5%. Australian shares rose 0.9% to their highest since July 2011, with the mining sector up on higher metals prices. South Korean shares added 0.7%.
Japan’s Nikkei average opened 0.9% higher.
“The Kospi will attempt a second day of gains as the macro environment has improved. However, the rise will be capped by concerns about third quarter earnings,” said Won Sang-pil, an analyst at Tongyang Securities, referring to Korean stocks.
The euro jumped 0.5% to its highest since 17 September of $1.3125 after rating agency Moody’s Investors Service on Tuesday affirmed its investment grade sovereign rating on Spain, easing fears about Madrid’s ability to manage its huge public debt.
Moody’s assigned a negative outlook but kept its Baa3 rating, citing the willingness of the European Central Bank to undertake outright purchases of Spanish government bonds and the Spanish government’s continued commitment to implement fiscal and structural reform measures.
A senior German lawmaker said on Tuesday that a media report on the Spanish government applying for a precautionary credit line had “overinterpreted” comments he made on the issue and that he had not been referring to Spain.
“Relief is probably a good way of describing it. You also get a sense that something is happening on the Spanish bailout story as well ... and markets generally like that,” said Robert Rennie, chief currency strategist at Westpac Bank.
The single currency was also supported by a closely-watched monthly survey from the ZEW institute on Tuesday that showed a better-than-expected improvement in investor confidence in Germany, the euro zone’s largest economy and growth engine.
There was no reaction to a Kyodo News report that Japanese Prime Minister Yoshihiko Noda plans a new round of economic stimulus by the end of next month as the country has entered a lull, quoting sources close to Noda.
The dollar eased 0.1% against the yen at 78.80, retreating from Tuesday’s one-month high of ¥78.97.
Investors will likely focus on the second US presidential debate with Republican candidate Mitt Romney and President Barack Obama, slated for Tuesday at 09:00 pm in Hempstead, New York.
“In theory it matters because it determines (Federal Reserve Chairman Ben) Bernanke’s tenure and the odds of corporate friendly policy such as a home repatriation act. In practice, it matters because the financial industry seems to have been pushed to one side of the debate, impacting its confidence,” Societe Generale analysts said in a research note.
US crude futures gained 0.4% to $92.41 a barrel.
Spot gold inched up 0.1% to $1,749.29 an ounce.
Asian credit markets firmed slightly, with the spread on the iTraxx Asia ex-Japan investment-grade index narrowing by 1 basis point. Reuters