Tokyo - Asian shares and the euro rose on Monday as a stronger-than-expected US jobs data and emerging optimism for European action on the debt crisis lifted risk appetite, although caution remains until concrete steps are taken, which may be weeks away.
Investors will be looking to data from China starting on Thursday, from trade to bank loans and investment, to give the global economy a further lift.
China's central bank on Sunday pledged to intensify monetary policy fine-tuning and improve credit policy to bolster the world's second largest economy.
With the euro zone debt crisis crippling global economic activity, Southeast Asia's largest economy, Indonesia, will likely report its second quarter gross domestic product grew 6.1 percent on Monday, indicating its sizzling economy is starting to cool and show dents in its resilience to a global slowdown.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.7 percent, and Japan's Nikkei stock average opened 1.5 percent higher.
The euro gained 0.4 percent to $1.2438 its highest in a month, while the dollar was at 78.54 yen, off a two-week high of 78.77 hit on Friday when weakening safe-haven demand weighed on the yen.
A rebound in riskier assets improved sentiment in Asian credit markets, narrowing the spread on the iTraxx Asia ex-Japan investment-grade index by four basis points.
Better than expected US jobs data spurred unwinding of safe-haven holdings in treasuries and the dollar while boosting US and European equities and oil on Friday.
European shares rose to four-month highs on Friday and the euro surged as investors re-evaluated the European Central Bank's statement after its policy meeting on Thursday which hinted at upcoming policy steps to contain surging borrowing costs in Spain.
“We believe the rate sell-off on Friday is unlikely to continue, as we see this market trading range-bound until concrete news out of Europe emerges,” Barclays Capital analysts said in a research note, referring to the selling of safe-haven government bonds on Friday.
“We think the likelihood of further central bank moves remains high, particularly in Europe... this bodes well for risk,” they said, adding that while the euro can still rise on short covering, a lower euro will be part of the European policy mix and thus would look to fade out the rally.
Oil eased after rallying on Friday, with Brent down 0.2 percent at $108.63 a barrel and US crude futures down 0.3 percent at $91.17 a barrel.
A rebound in riskier assets improved sentiment in Asian credit markets, narrowing the spread on the iTraxx Asia ex-Japan investment-grade index by four basis points.
As risk aversion abated, the CBOE Volatility index, which measures expected volatility in the Standard & Poor's 500 index over the next 30 days, plunged 11 percent to close at 15.64 on Friday. Some analysts cautioned that the VIX nearing the 13.70-15.30 area of support has always provoked at least an interim reversal in trend.
US nonfarm payrolls rose the most in five months, but a rise in the jobless rate left most economists still expecting further monetary stimulus from the Federal Reserve as soon as September.
Austrian Chancellor Werner Faymann told a newspaper that he thinks German Chancellor Angela Merkel will drop opposition to measures such as giving the euro zone's permanent bailout fund a banking licence if that is what is needed to save the euro.
Spain's economy minister told a newspaper on Sunday Madrid has time to wait for clarity on what a full European rescue would involve as it has already covered the majority of its debt needs for the year. On Friday, its prime minister had signalled that he may seek an aid package.
Greece, which faces a 3.2-billion euro bond maturity on August 20, is leaning towards issuing treasury bills to plug a cash squeeze this month, its deputy finance minister said.
Greece's international inspectors said they will return in September for a final verdict as they said Athens, while making progress in finding budget cuts needed to continue its bailout programme, has not done all work. - Reuters