Asian shares rose on Monday as surprisingly robust U.S. jobs data bolstered investor risk appetite, overshadowing worries about a lack of progress in Greek debt restructuring talks that are vital to containing the euro zone crisis.
MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.3 percent after climbing as much as 0.7 percent earlier to its highest in more than five months. The index recorded a fifth successive weekly gain last week.
Japan's Nikkei average rose to a three-month high just shy of 9,000 and was last up 1.1 percent at 8,925.
Global economies showed further evidence of resilience last month, with U.S. job creation far exceeding expectations while services sector activity accelerated surprisingly to its highest in nearly a year. The euro zone's private sector economy expanded in January for the first time since August, easing fears of a recession.
But Greece remained a drag as a number of major conditions demanded by the Troika, representing Greece's European Union, European Central Bank and IMF lenders, were still outstanding. Athens must tell the EU by Monday whether they accept the stern terms of a new bailout deal. Without the deal, Athens would head for a disorderly default.
ECB bank borrowing/deposits: http://link.reuters.com/nyd85s
Markets which put more weight on uncertain prospects over the Greek bailout and demand possibly weakening bucked the rising trend in equities. The euro and copper fell while gold rose on safe-haven appeal as euro zone concerns persisted.
It's a mixed bag really. Until Greece is resolved, it's hard to get too unambiguously bullish on the back of better U.S. news and liquidity from Europe, said Andrew Pease, Sydney-based chief investment strategist at Russell Investments Asia Pacific.
It's hard to see any solution to Greece that doesn't involve some form of default, he said, adding that while the uncertainty over the Greek issue remained a source of volatility, an event risk would be a known unknown and not a surprise.
The euro fell 0.5 percent to $1.3091 and the dollar index against a basket of key currencies gained 0.4 percent to 79.201.
Latest figures dated January 31 showed investors had cut their euro short positions, after five weeks of selling, but the market was still significantly short of the single currency.
Investor appetite for higher returns were highlighted by EPFR Global data which showed flows into Emerging Market Equity Funds hitting a 43-week high in the week ended February 1. EPFR Global-tracked Bond Funds saw inflows of a net $7.47 billion during the same period for the biggest weekly total since it started tracking them about 10 years ago.
A strong U.S. employment report fuelled the risk rally further, and some investors now wonder whether it is overextended. We think it is advanced, which means selectivity is warranted, but not over, Barclays Capital said in a note.
We see value in EM assets, including currencies. EM carry trades are supported by global central banks, growth differentials, the fading risk of a hard landing in China, clean balance sheets and positioning, it said.
Markets may be prone for a pullback technically as the rally late last week brought many near key resistance.
The CBOE Volatility index VIX, which measures expected volatility in the S&P 500 over the next 30 days, closed at a seven-month low of 17.10 on Friday, reflecting improved market sentiment and receding fears of sharp market falls.
A move to the support zone around 14-15 suggested increased volatility in coming sessions.
Spot gold rose 0.4 percent to $1,733 an ounce after falling on Friday when the jobs data dashed hopes for more stimulus from the Federal Reserve, which had been priced into bullion's recent rally.
London copper fell 0.2 percent to $8,545 a tonne and Brent crude futures eased 0.2 percent to $114.38 a barrel.
Asian credit markets strengthened, narrowing the spreads on the iTraxx Asia ex-Japan investment grade index sharply by more than 10 basis points.
Australian retail sales slipped 0.1 percent in December against a 0.2 percent rise forecast. Investors see an easing by the Reserve Bank of Australia at its policy meeting on Tuesday.
(Additional reporting by FX analyst Krishna Kumar in Sydney; Editing by Alex Richardson.)