Further good news came with the release of Australian June employment figures that surged well above forecasts, promising to underpin household incomes and spending and sending the Australian dollar higher.
U.S. financial company State Street Corp said on Wednesday that quarterly earnings would far exceed expectations, providing a lifeline to investors after several weeks of dismal economic reports and propelling Wall Street to its biggest one-day gain in six weeks.
Materials and financial shares drove Asian shares to their highest since June 29 and Japan's benchmark Nikkei average <.N225> appeared to be on target for its best one-day rise in over a month, with exporters especially strong performers. <.T>
It could easily be viewed as a bounce from an oversold market in equities and risk appetite, and most people will see it in that light, said Greg Gibbs, a currency strategist at Royal Bank of Scotland in Sydney.
But give it some time. They won't be immediately trying to sell it down, he said, referring to the rally in risk assets.
The MSCI index of Asia Pacific shares outside Japan <.MIAPJ0000PUS> rose 1.8 percent, its highest since June 29.
Japan's Nikkei shone, gaining 2.6 percent to 9,527.21, its highest since June 29 and on track for its best one-day gain since June 3. It fell to 9,091, a seven-month low, on Tuesday.
This is a reaction to the oversold state in the market. There were very few reasons to sell off the index to 9,000, said Mitsuo Shimizu, deputy general manager at Cosmo Securities.
Although there are vague worries about the outlook, at least for now corporate earnings appear to be on a solid footing.
Asset Management and custody firm State Street gained nearly 10 percent after its forecast and bank stocks rallied after heavy losses in recent weeks, with the KBW bank index <.BKX> up 5.6 percent, after the forecast reinforced expectations for the coming earnings season.
Australian shares were the next runner-up after Japan, gaining 2.3, with banks among the strongest performers.
June Australian employment figures, released mid-morning, surged to 45,900, far above market forecasts of 17,500 in a Reuters poll.
The Australian dollar rose to 0.8731, gaining around 1.2 percent on the day, after the jobs data. It rose 1.5 percent against the yen.
The euro climbed to a two-month high above $1.2665 and rose as far as $1.2688 on electronic trading platform EBS, breaking above resistance at $1.2673 that had been seen as a hurdle to further gains.
Still, most analysts in a Reuters poll believe it will stay weak against the dollar over the coming year. The survey of about 60 analysts, taken July 2-7, predicted the euro would fall to $1.24 in one month and $1.20 in three months, then to $1.18 in six months and in mid-2011.
Crude oil rose 92 cents or more than 1 percent after an industry report showed U.S. inventories plunged last week, adding to price gains triggered by surging equity markets.
Gold extended its rebound, with spot gold rising to 1,204.90 an ounce.
(Additional reporting by Charlotte Cooper and Aiko Hayashi; Editing by Kazunori Takada)