Asian stocks rebounded on Tuesday, a day after suffering their biggest percentage fall in 10 weeks, as Citigroup's best results since 2007 raised investor optimism about corporate earnings and risk aversion receded.
A flurry of good results from Wall Street and easing fears about the potential fallout from fraud charges against Goldman Sachs helped whet appetite for risk, which also pulled down the dollar and the yen.
The Australian dollar surged after minutes of a central bank meeting hinted that more interest rate rises were in the pipeline, while tame inflation data pressured the New Zealand dollar as it made a case for a delay in monetary tightening.
The MSCI index of Asia-Pacific stocks outside Japan <.MIAPJ0000PUS> was up 0.8 percent, reversing some of Monday's 2.3 percent fall that followed news of the charges filed by the U.S. Securities and Exchange Commission against Wall Street titan Goldman Sachs.
Regional energy <.MIAPJEN00PUS>, financial and material stocks <.MIAPJMT00PUS> were among the big gainers after risk aversion ebbed and investors focused on corporate earnings.
We think earnings have been good, valuations are in the middle of the historical range of the last 15 years, said Khiem Do, head of the Asia multi-asset group at Baring Asset Management which oversees $50 billion.
The Goldman concerns had an impact on U.S. financials but I don't know what that has to do with Asian financials, he said while adding the previous day's fall was sentiment-driven.
A report the SEC had split 3-2 along party lines to approve an enforcement case against Goldman Sachs showed it was not a clear-cut decision and triggered a rally on Wall Street that was also inspired by upbeat earnings from Citigroup .
The Dow Jones industrial average <.DJI> rose 0.67 percent, and the Standard & Poor's 500 Index <.SPX> added 0.45 percent.
And ironically, the market is now shifting its attention to Goldman's blowout earnings that are expected to give the rally a fresh leg-up.
The Australian dollar jumped and the New Zealand dollar eased as investors took opposite views on the monetary policy direction for the currencies' respective economies.
The Aussie rose as high as $0.9275 from around $0.9256 before the minutes that showed the central bank felt it was not prudent to delay a hike given an expected boom in the country's terms of trade.
The kiwi was down at $0.7089/94, after falling more than a third of a cent from around $0.7125 before the inflation data, which backed views the central bank would be in no hurry to hike rates before the middle of the year.
On the other hand, inflation was a cause for concern for two of the biggest economies in the region, and central bank actions to contain rising prices were likely to hurt performance of stocks, HSBC said in a report.
The combination of slowing momentum, rising rates and structural worries on China and India will not be helpful for equities, it said in a report.
We expect Asian equities to rise over coming quarters as long as growth comes through but to continue to lag global equities, it said, while adding that markets such as Australia, Malaysia and India, where the central banks have raised rates, had underperformed the region.
Greece will also be in focus as the debt-stricken country aims to raise 1.5 billion euros ($2.0 billion) via an auction of 3-month T-bills on April 20 amid stubbornly high borrowing costs that may force it ask for aid from its euro zone peers and the IMF.
(Editing by Alex Richardson)