* MSCI Asia ex-Japan up 0.7 pct, Nikkei eases from 2-month
* Euro slips after Moody's scraps France's top-notch rating
* Markets prone to profit taking ahead of U.S. long weekend
* BOJ stands pat, RBA keeps rate cut option in Nov. 6
* European shares likely lower
By Chikako Mogi
TOKYO, Nov 20 Asian shares rose on Tuesday on
hopes of a compromise in the U.S. fiscal crisis, while the euro
fell after Moody's Investors Service scrapped France's top-notch
credit rating, reminding investors of the downside risk from the
euro zone debt woes.
With risk assets from stocks to commodities rallying over
the past two sessions, recovering some of last week's sharp
losses, markets were prone to profit taking as trading will
likely slow ahead of Thanksgiving holiday weekend.
The dollar steadied against a basket of key currencies
after Monday's 0.5 percent drop, capping commodities and
gold. Oil also retreated from a near 3 percent jump on Monday.
U.S. stock futures eased 0.1 percent to hint at a
weak Wall Street open. Financial spreadbetters predict London's
FTSE 100, Paris's CAC-40 and Frankfurt's DAX
will open down as much as 0.3 percent.
MSCI's broadest index of Asia-Pacific shares outside Japan
added 0.7 percent, led by the materials and
technology sectors .
Wall street climbed nearly 2 percent on Monday thanks to
expectations that U.S. Congress reach a compromise to avoid $600
billion in tax increases and spending cuts due to start in
January - the "fiscal cliff" that threatens to derail the U.S.
"There's some optimism at the moment about the Americans
doing something constructive about their fiscal cliff problem,"
said Damien Boey, equity strategist at Credit Suisse.
Tech stocks lifted Korean shares up 0.6 percent and
Hong Kong stocks added 0.8 percent to a one-week high.
Shanghai shares fell 0.5 percent, nearing their
lowest since early 2009 hit on Monday, after data showed China's
foreign direct investment inflows fell 3.45 percent in the first
10 months of 2012 from a year ago.
Japan's Nikkei average inched down 0.1 percent,
after reaching a fresh two-month high earlier in the day.
As expected, the Bank of Japan took no fresh steps after a
two-day policy meeting on Tuesday, reiterating that it would
pursue powerful monetary easing as Japan's economy is weakening.
The dollar fell 0.2 percent to 81.23 yen, but held
near its highest since April 25 of 81.59 yen touched on Monday.
David Baran, co-founder of Tokyo-based hedge fund Symphony
Financial Partners, said Japanese equities and the yen were
attractive in comparison to other Asian assets. Nikkei has
stayed at the lower end of ranges through 2012 and there are
expectations that next month's election will result in a
government that wants the BOJ to take stronger stimulus steps.
"Just from a risk-reward standpoint, you are seeing
investors looking at Japan, looking at the yen and natural
extrapolation of maybe we've seen the end of the bottom range of
the dollar/yen," he said. "If you are trying to trade big moves,
turning points, then you are getting into low risk, high reward
possibility in yen and subsequently Japanese equities."
TAIL RISKS REMAIN
Euro zone finance ministers are expected to give a tentative
go-ahead for the disbursement of 44 billion euros in emergency
loans to Greece at a meeting later on Tuesday and discuss how to
reduce Greek debt and provide two extra years of external
financing to help Athens meet its fiscal target.
Ratings agency Fitch on Monday warned that failure to reach
a deal on the "fiscal cliff" could trigger a recession and push
the U.S. jobless rate above 10 percent. Given such "far-reaching
effects," Fitch said it did not expect Congress to allow it to
happen, echoing recent market optimism.
But Richard Franulovich, senior currency strategist at
Westpac Securities in New York, said in a note that the positive
conciliatory rhetoric over the "fiscal cliff" could easily come
unstuck, while anything that is produced at the euro zone
finance ministers' meeting is likely to be piecemeal.
"Given our read of the fiscal cliff and Greek risks we
remain comfortable fading strength in risk assets," he said.
The euro zone's debt crisis saw Moody's cut France's
government bond rating to Aa1 and keep its negative outlook,
citing the country's uncertain fiscal outlook and deteriorating
France's downgrade sent the euro down 0.3 percent to
$1.2777 from $1.2810, before it steadied to $1.2797, and also
weighed on the euro against the yen.
Hiroshi Maeba, head of FX trading Japan for UBS in Tokyo,
said the reaction to the downgrade was limited, as trading was
getting lighter ahead of Thanksgiving weekend.
"Given the recent market rally, the rest of the week is
likely to be spent on adjusting positions before the long
weekend, with any uptick giving way to profit taking," he said.
Brent crude held steady above $111 a barrel on
Tuesday, less than a dollar away from a one-month top hit in the
previous session, on hopes over the U.S. budget crisis and
supply worries triggered by tensions in the Middle East.
U.S. crude futures eased 0.3 percent to $89.06.
Spot gold was nearly flat at $1,732.05 an ounce.
With risk appetite recovering, credit market spreads on the
iTraxx Asia ex-Japan investment-grade index
tightened by 4 basis points.