(Reuters) - Markets jumped Monday as policy easing by China and prospects for Greece to clinch a second bailout fund buoyed investor appetite for riskier assets, sending U.S. crude up nearly $2 a barrel and Asian shares up nearly 1 percent.
China's central bank on Saturday cut its reserve requirement ratio (RRR) -- the amount of cash banks must hold in reserves -- boosting lending capacity by an estimated 350-400 billion yuan ($55.6-$63.5 billion).
Analysts said the cut had been long awaited and would boost the confidence of domestic stock investors, with the Shanghai Composite <.SSEC> expected to lead Asian peers higher. Other markets were likely to benefit, including Japan's Nikkei and Indian shares.
China's move followed Japan, which last week increased monetary easing, as global central banks inject liquidity to shield their economies from the euro zone's debt crisis. Expectations that the European Central Bank will supply massive amounts of liquidity at its second funding operation later this month have also supported risk trade in recent sessions.
MSCI's broadest index of Asia Pacific shares outside Japan <.MIAPJ0000PUS> rose 0.7 percent to its highest in six months. Japan's Nikkei <.N225> opened up 1.6 percent.
While the actual RRR cut was as expected, the PBoC clearly supporting economic growth in the world's second largest economy is positive for the AUD, NZD and risk assets more broadly, said Annette Beacher, head of Asia-Pacific research at TD Securities.
Asian credit markets firmed with a recovery in risk appetite, narrowing the spreads on the iTraxx Asia ex-Japan investment grade index by 5 basis points early on Monday.
The yen fell to its lowest in six months against the dollar around 79.89 yen, and commodity currencies jumped. The Australian dollar gained nearly a full cent from late New York levels to a high of $1.0817. The euro was up 0.6 percent to $1.3225.
U.S. crude rose nearly $2 to $105.21 a barrel to a nine-month high on Monday, after Iran halted oil sales to Britain and France. Expectations that Greece would secure a debt bailout this week also lifted market sentiment. Brent also rose more than $1 on Monday to its highest in eight months.
Iran ordered a halt to its oil sales to Britain and France on Sunday in a move seen as retaliation against tightening European Union sanctions, as a team of U.N. inspectors flew to Tehran to press the Islamic Republic over its disputed nuclear programme.
Euro zone finance ministers are expected to approve the 130-billion-euro rescue programme for Greece at a meeting on Monday, and while there is still scepticism over Athens' commitments - including implementing 3.3 billion euros of spending cuts and tax increases - officials said momentum was behind approving the deal.
We expect Greece to make headway towards receiving the funds needed to avoid a near-term default and for markets to remain constructive on risk while keeping an eye on the downside, Barclays Capital said in a note. We continue to favour currencies with links to the economic resilience of the U.S. and China.
Senior officials from euro zone finance ministries and the ECB held a conference call on Sunday to discuss the final details for Greece's second bailout since 2010, including a debt sustainability analysis key to the International Monetary Fund.
Without the bailout, Greece would miss a crucial March 20 deadline to pay a 14.5 billion euro bond redemption payment.
Reflecting recovery in risk appetite, the CBOE Volatility index VIX <.VIX>, which measures expected volatility in the S&P 500 index <.SPX> over the next 30 days, plunged 7.5 percent on Friday to its lowest in about a week at 17.78.
Bank-to-bank euro lending rates fell to one-year lows on Friday on expectations for the ECB's long-term refinancing operation on February 29.
(Additional reporting by Ian Chua and Reuters FX analyst Krishna Kumar in Sydney; Editing by Richard Pullin)