* MSCI Asia ex-Japan up 0.5 pct, led by Australia
* Nikkei sags as yen firms
* Euro vulnerable but off seven-week lows
* European shares also likely rebound
By Chikako Mogi
TOKYO, Feb 27 Asian shares rebounded on
Wednesday, drawing enough strength from solid U.S. data and the
Federal Reserve's rededication to monetary stimulus to take
Italy's political gridlock in stride.
The MSCI's broadest index of Asia-Pacific shares outside
Japan gained 0.5 percent after shedding 1.2
percent to a seven-week low the previous session, led by a 0.7
percent rise in Australian shares and a fresh record for
"With events in the U.S. overnight providing peace of mind,
the Australian index was again able to make forward progress,"
said Tim Waterer, senior trader at CMC Markets.
Italy's main FTSE MIB stock market index is
expected to open up 0.9 percent, while other European markets
are also seen rebounding from Tuesday's sharp decline, with
financial spreadbetters predicting London's FTSE 100,
Paris's CAC-40 and Frankfurt's DAX would open
as much as 0.3 percent higher.
U.S. stock futures were down 0.1 percent, however, to
point to a softer Wall Street start.
U.S. Treasuries in Asia firmed slightly, pinning benchmark
10-year yields near one-month lows as investors
kept their safe-haven demand intact.
"With no clear indication of a straightforward answer, the
big question is how long the (Italian) government will be held
in this state of deadlock. And how long therefore, the markets
will suffer," said Edward Bland at Duncan Lawrie Private Bank.
Federal Reserve Chairman Ben Bernanke strongly defended the
Fed's bond-buying stimulus before Congress on Tuesday, assuaging
worries that monetary policymakers might be getting cold feet.
U.S. data on Tuesday painted a positive growth outlook, with
new home sales jumping to a 4 1/2-year high in January, while
U.S. consumer confidence rose more than expected this month.
Japan's Nikkei stock average closed down 1.3 percent
as the yen firmed and hurt exporters.
U.S. crude rose 0.1 percent to $92.71 a barrel,
bouncing off its lowest since Jan. 4 of $91.92 hit on Tuesday,
but Brent eased 0.1 percent to $112.58.
London copper rose 0.5 percent to $7,900 a tonne
while spot gold eased 0.2 percent to $1,609 an ounce.
ITALY FALLOUT EYED
Italy's election gave no political party a parliamentary
majority, posing the threat of prolonged instability in the euro
zone's third-largest economy and potentially reigniting the
currency bloc's debt crisis.
Rome's 10-year bond yields rose to their
highest since mid-December of 4.90 percent.
Such "risk-off" sentiment has not yet spread completely,
with risk currencies such as the South African rand and the New
Zealand dollar showing a relatively limited drop compared to
sharp swings in major currencies such as the euro, analysts
They noted that if the spread between Italian and German
10-year yields were to exceed 400 basis points, it
would signal full-fledged risk aversion stirred by Italy.
"It is one thing to have a surge in yields on Italy debt; it
is another thing to talk about a bailout of Italy and we are not
close to anything like that, at this time. It's just a massive
repricing event," said Richard Hastings, macro strategist at
Global Hunter Securities.
The euro steadied around $1.3065, above a seven-week
low of $1.3018 on Tuesday.
The yen firmed 0.3 percent against the dollar to 91.70
. The yen hit its lowest since May 2010 of 94.77 on Monday
before the outcome of the Italian vote rattled financial markets
and sent the yen soaring to 90.85 yen. The yen was also up 0.2
percent against the euro to 119.80 after jumping to
118.74 on Monday from its day's low of 125.36.
Traders have said the rapid pace of yen weakening over the
past three months has probably paused, with markets looking for
a fresh catalyst -- including the Bank of Japan's actual rather
than proposed unconventional easing steps, and Japanese
investors buying foreign assets.
"The money flows into short yen trades are slowing, and the
risk of losing on short yen action has increased significantly
in recent days," Hastings said.
But the yen's latest rebound of about two yen suggested that
investors were still betting on Prime Minister Shinzo Abe's
aggressively reflationary "Abenomics" policy mix.
"It was largely investors adjusting positions after U.S.
stocks had rallied without a sense of caution and the yen
steadily fell," said Yunosuke Ikeda, a senior FX strategist at
A key factor underpinning the dollar/yen is the limited drop
in U.S. Treasury yields, with benchmark 10-year yields
trading around 1.88 percent, he said.
Ikeda estimated that expectations for "Abenomics" gains have
accounted for about 10 yen of a roughly 14-yen slide against the
dollar in the last three months, while 2 yen each was
attributable to improving global sentiment and Japan's
deteriorating trade balances.