Most Asian shares extended gains on Friday as key U.S. earnings reports beat expectations, fueling hopes that the global recession is receding, but deadly explosions at two Jakarta hotels weighed on Indonesia stocks and the rupiah.
The yen gained broadly and oil and gold edged down.
The blasts at the Ritz-Carlton Hotel and the Marriott Hotel in central Jakarta killed six people, sending Jakarta stocks <.JKSE> down 2 percent and lopping 0.7 percent off the rupiah, which has been Asia's best performing currency so far this year.
Strong earnings for major U.S. companies continued to cheer global markets as the quarterly reporting season moved into higher gear, pushing U.S. share indexes up about 1 percent overnight.
JPMorgan Chase & Co
Share markets have been keenly watched as a barometer of investor confidence, and market players were keeping a wary eye on earnings due out later on Friday, including Citigroup
Earnings from U.S. banks have been upbeat, but there are concerns that the positive results could be limited to the second quarter, said Takahiko Murai, general manager of equities at Nozomi Securities.
Some institutions appear to hold significant bad loans and third quarter results may not be as encouraging, he added.
Amid the good news, JP Morgan reported a surge in consumer credit losses, showing the economic recovery still has a long way to go, and Citigroup and Bank of America were expected to post relatively weaker performances, one trader said.
Asian shares ex-Japan rose 0.4 percent after recording their highest close in a month on Thursday. <.MIAPJ0000PUS>
Asia ex-Japan equity funds were the only ones of the four major emerging markets fund groups to see inflows during the second week of July, according to global fund tracker EPFR, while Japan equity funds recorded inflows for the third straight week.
Japan's benchmark Nikkei <.N225> clawed up 0.4 percent to 9,383.50. Gains have been limited by political uncertainty since Monday, when embattled Prime Minister Taro Aso said he aimed to call an election for August 30, despite grim prospects for his long-ruling conservative party.
Nissan Motor <7201.T> climbed 2.2 percent after the Nikkei business daily said Japan's third-largest automaker aims to develop its own hybrid technology for small and mid-size cars and will launch a vehicle using that system in Japan in 2011.
Australian shares gave up early gains to edge down 0.1 percent, ending a three-day rise, on concerns the recent rally may have pushed the market beyond what is justified by improved earnings expectations.
Hong Kong shares <.HSI> rose 1 percent.
YEN GAINS, DOLLAR ABOVE SIX-WEEK LOWS
The yen edged up against a range of currencies, though it was not immediately clear how much of this was due to the Jakarta explosions, with traders divided on whether the news had an impact on financial markets.
The Indonesian rupiah fell 0.7 percent to 10,200 per dollar, prompting state banks to sell dollars to support it, trades said.
There was a bit of panic in the market this morning after the explosions and investors tried to cover their short dollar positions, said a trader in Jakarta, noting that the market had been quite short on the dollar.
The dollar, which has been a defensive play for investors in the global economic crisis, hit a six-week low at 79.131 against the basket of six currencies <.DXY> on Thursday.
It later rebounded after data showed factory activity in the U.S. mid-Atlantic region contracted for a 10th straight month in July, and was holding at 79.432 at 0212 GMT.
But the greenback edged down against the yen, slipping 0.3 percent to 93.61. The Australian dollar slipped 0.9 percent to 74.81 yen while the kiwi edged down 0.7 percent to 60.27 yen.
Yields on U.S. 10-year Treasury notes stood at 3.550 percent, down nearly one basis point from U.S. trade but up from a two-month low of 3.26 percent hit on Monday.
September JGB futures rose 0.06 point to 138.65 after a smooth five-year debt sale on Thursday, still down from a 3-1/2-mth peak of 138.97 hit last week.
(Editing by Kim Coghill; additional reporting by Shinichi Saoshiro, Charlotte Cooper and the Jakarta newsroom)