* MSCI Asia ex-Japan up 0.9 pct, snaps 4-day losing streak
* Nikkei reverses, rises on optimism over bank earnings
* Yen takes breather from selling
* European shares likely rise
By Chikako Mogi
TOKYO, Jan 29 Asian shares rallied on Tuesday as
recent selling drew bargain hunters ahead of more U.S. economic
data and a Federal Reserve policy decision later in the week
that may offer clues to the Fed's stimulus plans.
European markets were seen following Asia higher, with
financial spread-betters predicting London's FTSE 100,
Paris's CAC-40 and Frankfurt's DAX would open
up as much as 0.3 percent.
U.S. stock futures were up 0.1 percent, hinting at a
firm Wall Street start.
Solid U.S. earnings and an improving U.S. business spending
gauge have combined with a recent run of positive global
economic data, along with signs of easing financial stress in
the euro zone, putting upwards pressure on Treasury yields.
Further signs of brightening U.S. growth prospects would
fuel speculation the Fed may consider pulling back on aggressive
easing stimulus. The Fed ends a two-day policy meeting on
The first estimate of U.S. fourth-quarter gross domestic
product also will be released on Wednesday, followed by non-farm
payrolls on Friday.
Few expect any immediate change to the Fed's very
accommodative monetary stance while other central banks such as
the Bank of Japan also embark on fresh easing to help spur
economic activities. India's central bank cut interest rates on
Tuesday for the first time in nine months.
The MSCI's broadest index of Asia-Pacific shares outside
Japan rallied 0.9 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 financial shares.
"It seems that a lower interest rate environment is starting
to improve confidence among the Australian business community.
Mix this in with the China rebound and we have a sharp rise in
confidence," said Ben Taylor, sales trader at CMC Markets.
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 closed up 0.4 percent, buoyed by optimism over
earnings of major banks.
"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.
The benchmark U.S. 10-year note yield briefly
pierced 2 percent on Monday for the first time since last April,
and inched up 2.5 basis points (bps) in Asia from New York
close. The 10-year Japanese government bond yield
Naka Matsuzawa, fixed income strategist at Nomura
Securities, said in research note that a sell-off in 5-year
Treasury notes over the last two days "would not have occurred
unless expectations of an economic recovery have gained ground
to the extent that the monetary policy outlook begins to
"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 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 122.10 yen after hitting 122.91 on Monday, its
highest point since April.
The euro was at $1.3450, not far from an 11-month
high of $1.3480 hit on Friday.
The euro's strength sharply contrasted with the crumbling
pound, which has been pressured by worries about the weak UK
economy, prospects of more monetary easing by the Bank of
England and the UK's unclear role within the European Union.
The euro extended its recent stellar run to hit 0.8575
sterling, its highest since late 2011, on Tuesday.
The pound fell to $1.5687, near a five-month low.
"The UK is a small open economy that has benefited from
capital inflows because it is not in the euro area but is in the
EU. The former is less helpful now, the uncertainty about the
latter is a clear negative. The result could be to take EUR/GBP
close to 0.90 before long-term downtrend resumes," said Kit
Juckes, FX strategist at Societe Generale in a note.
Commodities were underpinned by a more positive global
"I don't think there's much downside risk," said Tetsu
Emori, a commodities fund manager at Astmax Investments in
Tokyo. "I think economic data out of the United States has
improved, so i don't think there are any negative factors in the
U.S. crude rose 0.4 percent to $96.80 a barrel and
Brent inched up 0.1 percent to $113.64.
London copper gained 0.4 percent to $8,078 a tonne.
Gold inched up 0.4 percent to $1,661.95 an ounce but
was capped by receding investor appetitie for safe-haven assets.
Asian credit markets lagged the region's rallying equities,
pushing the spread on the iTraxx Asia ex-Japan investment-grade
index wider by 2 basis points.