SYDNEY Asian markets look set to gain on Wednesday as surprising strength in U.S. consumer spending reassured investors the world's largest economy was still on track for growth, lifting the dollar and Wall Street.
A pullback in the yen will be particularly welcomed by Japanese shares .N225, which suffered their sharpest daily drop in five months on Tuesday. Nikkei futures were pointing to a sizable bounce at the open.
Australia made the early running with a bounce of 0.7 percent .AXJO, having also fallen sharply on Tuesday. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was slowly inching higher.
The dollar bounced to 104.25 yen, leaving behind a low of 103.00, after U.S. retail sales figures repaired the damage done by last week's disappointing payrolls report.
While the headline measure of retail sales rose only a modest 0.2 percent, a core measure favored by analysts beat all expectations with a jump of 0.7 percent.
The upbeat news was slightly tempered by downward revisions to the previous month, but the data still pointed to healthy consumer demand for the fourth quarter.
"Growth in final sales, particularly household consumption, appears to have picked up sharply in Q4," said Barclays economist Peter Newland. The bank lifted its forecasts for economic growth in the quarter to an annualized 3.5 percent.
That, combined with a burst of merger activity and earnings beats by Wells Fargo (WFC.N) and JPMorgan (JPM.N), helped lift the Dow .DJI 0.71 percent. The S&P 500 .SPX added 1.08 percent and the tech-laden Nasdaq .IXIC jumped 1.69 percent.
The better economic news pushed 10-year U.S. Treasury yields up 5 basis points to 2.87 percent, while slugging Eurodollar and Fed funds futures.
Price moves have been wild recently as the market tries to second guess the speed of tapering by the Federal Reserve, and when it might actually start raising interest rates.
Two of the most hawkish of Fed officials, Dallas Fed chief Richard Fisher and Charles Plosser at the Philadelphia Fed, on Tuesday advocated sticking with tapering.
The Euro Zone contributed to the flow of improving economic news by reporting industrial output climbed 1.8 percent in November, above forecasts and a positive for growth in the fourth quarter.
That helped lift the euro 1.3 percent against the yen to 142.53 while keeping it stable on the U.S. dollar at
In commodity markets, a firmer dollar and rising equities shoved gold back to $1,244.29 an ounce and off a high of 1,255.00.
Oil prices were mixed with U.S. crude up 5 cents at $92.64 a barrel as traders squared positions amid some signs of strength in the U.S. economy.
In contrast, Brent fell 53 cents to $106.22 due to incremental increases in Libyan oil supply and expectations that Iranian crude will return to market.
(Editing Shri Navaratnam)