Asian stocks rise on Europe bank moves
European stock index futures rose on Friday, following a bounce in Asian shares, and the euro clung to gains from a 2-cent rally after euro zone policymakers moved to shore up struggling banks and fend off a financial crisis.
The European Central Bank (ECB) announced aggressive liquidity measures on Thursday, throwing a lifeline to lenders who have seen wholesale funding drying up as market confidence ebbed, and the European Union said it would present a plan for a coordinated recapitalization of banks by member states.
Gold, oil, copper and equities were all on course to post weekly gains on hopes that Europe's leaders may finally be getting to grips with a two-year-old sovereign debt crisis, although the scale of the task meant caution remained high.
There are still plenty of problems that face the European financial system, said Greg Gibbs, strategist at RBS in Sydney. The risk rally will probably run out to steam in the next week.
Asian credit indexes tightened as share markets climbed and regional interest rate swap curves were mostly higher, tracking a fall in U.S. Treasuries in the previous session.
Fears that the European crisis is heading inexorably toward a default by Greece -- and possibly others -- that could trigger turmoil in the banking system have caused a sharp sell-off in riskier assets since late July.
Euro STOXX 50 index futures rose 0.4 percent on Friday. Futures for Germany's DAX and France's CAC-40 were also firmer, while financial spreadbetters called the FTSE 100 <.FTSE> to open up as much as 0.6 percent. <.EU> <.L>
Tokyo's Nikkei share average <.N225> rose 1 percent, while MSCI's broadest index of Asia Pacific shares outside Japan <.MIAPJ0000PUS> climbed 2.9 percent, led by a 4.4 percent gain from the materials sector <.MIAPJMT00PUS>. <.T>
U.S. stocks <.SPX> <.DJI> rose more that 1.5 percent on Thursday, as global stocks posted their third straight day of gains. <.N>
S&P 500 index futures traded in Asia were mildly negative, indicating some caution ahead of the non-farm payrolls report later, a weekly jobs gauge that is always closely watched for clues on the state of the U.S. economy.
No one wants to take a big position ahead of the U.S. jobs report later in case there is a downside surprise, said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments in Tokyo.
Asian emerging markets have been punished hard in the market slide of recent months, with MSCI's Asia ex-Japan index falling more than 25 percent from its April high for the year, partly due to foreign fund managers taking money out of markets that had been outperforming to cover losses elsewhere.
Citigroup analysts said in a note that outflows from emerging market equity funds, which often set the overall market direction, had accelerated in the week to October 5, with a net $1.3 billion pulled from Asia.
RETURN OF RISK
The European Central Bank said on Thursday it was ready to buy bonds to provide longer-term cheap money for European lenders in need of funding.
And, in a further boost, European Commission President Manuel Barroso said the EU's executive arm was proposing coordinated action to cleanse banks of toxic assets, the most explicit statement yet from a top European official on joint action to help restore battered confidence in the sector.
The euro, which has fallen back from a 2011 peak near $1.50 in May, was steady around $1.3433, after jumping from a low of $1.3240 on Thursday.
Many market players put the euros rally down to short-covering -- when traders buy back into a currency to realize gains on an earlier bet it would fall -- and believe the single currency's downtrend remains intact.
The euro still seems to be in a downward sloping tunnel, said Kimihiko Tomita, manager of forex at State Street in Tokyo. Inside this tunnel, people are trying to grope their way along and occasionally they may go up but the tunnel itself is still sloping down.
While some investors were disappointed the ECB did not also cut interest rates, riskier assets such as equities, commodities and currencies linked to commodity markets, such as the Australian dollar, rallied.
Copper rose around 1.3 percent on Friday, extending a gain of nearly 6 percent in the previous session. Copper has risen nearly 4 percent this week, after tumbling 23 percent in the previous four weeks.
Gold rose 0.6 percent to around $1,659 an ounce, on course for its first week of gains after four straight weeks of declines that saw it shift from a negative to a positive correlation with riskier assets as investors seeking safety turned instead to U.S. Treasuries and the dollar.
Brent crude was flat around $105.67 a barrel and U.S. crude was also little changed at $82.60, on course for its biggest weekly gain in seven months.
As some confidence returned, credit markets tightened, with spreads measured by iTraxx's Asia ex-Japan investment grade corporate index coming in about 20 basis points, after a sharp widening at the start of the week.
Japanese government bonds eased, with the benchmark 10-year yield rising 1.5 basis points to 0.985 percent.
If the U.S. jobs report shows strong figures, we may see more unwinding, said a fund manager at a Japanese asset management firm. But a sharp correction in JGB prices is unlikely as investors' concerns are centred on the euro zone debt crisis, which will not be resolved easily.
(Additional reporting by Cecile Lefort in Sydney and Lisa Twaronite and Hideyuki Sano in Tokyo; Editing by Kavita Chandran)
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