Asian stocks hit highs for the week on Thursday after new austerity steps pledged by Portugal and Spain raised hopes that Europe's debt crisis can be contained, while IBM's strong profit forecast boosted tech shares.
The optimism was seen carrying into the opening of European markets with futures for the STOXX Europe 50, Germany's DAX and France's CAC 40 up 0.7 to 0.8 percent.
Despite edging higher against the dollar, the euro struggled near 14-month lows on worries the steep government spending cuts in parts of Europe would drag on the region's already feeble economic growth.
Doubts about the euro's long-term viability and worries about inflation continued to spur a flight into gold, which shot to a fresh record for a second day in a row.
The jump to $1,248.15 an ounce brought gold's gains to nearly 20 percent since early February.
Spain said on Wednesday it will slash civil service pay and cut public jobs while Portugal's finance minister told Reuters his government had identified new austerity measures to reduce its budget deficit, offering investors some reassurances that those countries are addressing deep-rooted fiscal problems.
The euro zone problems had really weighed on the market, and reassurance after the Spanish announcement has allowed investors to turn their eyes to things like earnings and economic indicators for the first time in days, said Toshiyuki Kanayama, a market analyst at Monex Inc in Tokyo.
Japan's Nikkei <.N225> gained 2.2 percent to a one week closing high as buyers snapped up tech stocks like Advantest, which makes micro chip testing equipment, and shares of other companies which have recently released upbeat earnings and sales outlooks. Advantest jumped 3.3 percent.
While worries remain that Greece and other governments will not be able to deliver on deeply unpopular spending cuts, there were signs that recent strains in global money markets were easing, further buoying investor confidence.
CREDIT MARKET REVIVAL
The three-month dollar London interbank offered rate (LIBOR) was unchanged after rising steadily during the height of the worries about Europe's sovereign debt problems.
Debt capital markets also showed signs of revival in the region with Macau casino operator Melco Crown Entertainment selling a $600 million bond overnight following last week's jitters over European debt which had issuers postponing their offerings.
By 0645 GMT, the MSCI Asia ex-Japan index <.MIAPJ0000PUS> was 2 percent higher after hitting its highest this week with technology <.MIAPJIT00PUS>, the best performing sector, outpacing the broad market with a 2.9 percent rise.
Tech bellwether has forecast it would roughly double its profit by 2015, fuelling bullishness on the sector.
Tech-heavy stock markets in South Korea <.KS11> and Taiwan <.TWII> rose over 2 percent. Both had seen several days of selling by foreign investors earlier in the week, but data showed overseas buyers were returning to Korean shares on Thursday.
In Taiwan, chipmakers Taiwan Semiconductor Manufacturing Co (TSMC) <2330.TW> and UMC <2303.TW> boosted the main TAIEX share index <.TWII> by as much as 2.4 percent.
U.S. data and earnings have helped, meaning stocks are moving on news from abroad, said Chu Yen-min, senior vice-president at KGI Securities in Taiwan. This market correction is on international factors.
The euro edged up 0.4 percent against the dollar, but traders said any gains were likely to be limited, with some seeing the currency falling below $1.2400 as it did in 2008. Traders cited market talk of decent bids in the euro at $1.2610/20 and also ahead of an option barrier at $1.2600.
Financial markets overall have been returning to calm but the euro remains on a downtrend, said Kosuke Hanao, head of treasury product sales at HSBC in Tokyo.
Although the panic sell-off in the euro has eased at the moment, the downside risk still remains, he said.
Meanwhile, the Australian dollar rose as high as $0.9020 after data showed the domestic economy added 33,700 jobs in April, handily beating forecasts for a 20,000 rise.
Despite the strong growth numbers, there was little impact on the Australian rates market since the central bank is expected to hold rates until November because of the European worries.
Crude oil futures were 6 cents lower at $75.59 a barrel, after falling to a low of $75.27.
(Additional reporting by Aiko Hayashi in TOKYO and Jonathan Standing in TAIPEI; Editing by Raju Gopalakrishnan)