Asian shares rebounded on Thursday as fears receded that China's policy tightening would slow its demand, while strong Australian jobs data raised the chances of a February interest rate hike and boosted the Aussie dollar.
Helped by an upbeat day on Wall Street, Asia stocks rose more than 1 percent, heading back toward a 17-month high reached on Monday. Regional stocks dropped on Wednesday after Beijing's surprise increase of bank reserve requirements -- China's strongest step yet to rein in asset inflation. <.N>
European shares were also set to rise, with financial spreadbetters expecting the FTSE 100 <.FTSE> to open as much as 0.8 percent higher.
The market is recovering as investors are relieved to see U.S. shares recover fairly quickly after news of China's monetary tightening moves, said Lee Kyoung-su, a market analyst at Taurus Investment & Securities.
Technology issues in particular are going strong amid strengthening earnings expectations. Positive hopes are brewing ahead of key U.S. technology company earnings, including Intel
Tech and materials stocks gained ground after suffering on Wednesday on concern that China's import demand would weaken if tighter policy cooled its rapid economic growth. Shipping firms also rose.
The MSCI index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> rose 1.2 percent, reversing much of Wednesday's 1.5 percent decline.
Japan's Nikkei average <.N225> rose 1.6 percent to hit a 15-month high. It finished marginally below the intraday high but the close was still the highest since October 2008.
A rebound had already begun in some markets by late Wednesday as investors reckoned China's step confirmed a broad economic recovery and threatened neither growth nor corporate profits, with eyes turning to U.S. earnings.
After a week of signaling tighter monetary conditions, the central bank surprised markets on Thursday by leaving the interest rate on its three-month bills unchanged. Some traders said the result signaled the central bank would now take a breather from its tightening campaign.
Taiwan shares <.TWII> closed up 1.1 percent, with computer maker Acer <2353.TW> hitting a 10-year closing high.
But some investors remained wary, noting that Alcoa's results early this week had disappointed.
Hopes for a recovery in the economy and earnings have returned thanks to the stable state of the U.S. economy and currency markets, though investors might be getting a little ahead of themselves in terms of the speed of recovery in earnings, said Masaru Hamasaki, senior strategist at Toyota Asset Management.
In Japan, Mizuho Financial Group <8411.T>, the country's second-largest bank by assets, is considering a rights offering as a way to boost its capital, Bloomberg reported.
The bank shed more than a third of its market value in 2009 on concerns it would need massive capital raising to meet stricter global rules. But its shares rose 5.7 percent on Thursday, with analysts saying a rights issue eased worries about share dilution.
AUSSIE JOBS BOOST
In Australia, jobs data for December beat forecasts and the market priced in a 75 percent chance of a rate rise at the next policy meeting, sending the Aussie dollar up and the low-yielding yen down.
The Australian dollar advanced 0.7 percent to $0.9301, with traders looking for a move beyond its 2009 peak of $0.9407. It climbed 1 percent to 85.33 yen.
The Australian dollar gained last year as the market anticipated the central bank would lead other developed nations in tightening policy.
It has already lifted its key cash rate by 75 basis points to 3.75 percent in contrast to the likes of the United States and Japan where rates are close to zero.
The positive news from Australia has cheered investors, prompting them to seek more risks, said Hideki Amikura, deputy general manager at Nomura Trust and Banking in Tokyo.
The yen also lost ground against the dollar, euro and New Zealand dollar. The dollar index <.DXY>, a measure of its performance against six other major currencies, eased 0.1 percent.
The euro rose 0.4 percent to $1.4544 as market players waited for a European Central Bank meeting at which it is expected to flag that it will keep rates at a record low of 1.0 percent for some time.
U.S. crude futures were heading back up toward $80 after falling for three days in a row on builds in U.S. inventories despite colder weather. NYMEX crude for February delivery stood at $79.93 a barrel after settling at $79.65 on Wednesday.
Japanese government bond (JGB) futures fell following a drop in U.S. Treasuries and as the rise in Tokyo's stock market reduced demand for lower-risk debt. March 10-year JGB futures dropped 0.14 point to 138.97 after two straight days of gains.
Spot gold edged up to $1,141.60 per ounce, compared with New York's notional close of $1,137.60.
(Additional reporting by Jungyoun Park in Seoul, Elaine Lies, Aiko Hayashi and Rika Otsuka in Tokyo)