Chinese shares rose on Monday to extend gains on hopes that Beijing will continue to use policy to support asset prices, while gold prices dipped but kept within striking distance of $1,000 after U.S. unemployment rose to a 26-year high.
Among the factors cited by analysts for a broad rise in Asian equity prices were a pledge by G20 leaders over the weekend to keep stimulus measures in place for longer and draft rules from China allowing more foreign portfolio investment.
However, the relationship between assets based on risk taking by investors has loosened up some, a sign perhaps of underlying uncertainty about the medium-term outlook, crowded trades and stretched valuations.
For example, the Australian dollar and commodity prices, which have usually risen when equities do, were steady.
Fears about a 'jobless recovery' have increased as a lack of hiring is set to persist for some time year, said Mitul Kotecha, head of foreign exchange strategy with Calyon in Hong Kong, in a note.
It is good news that officials are committed to maintaining stimulus but this commitment cannot be indefinite.
Japan's Nikkei share average rose 1 percent on buying of technology-related stocks.
Advantest Corp and other chip-related shares gained, buoyed by broad buying of their U.S. peers after Intel Corp's chief executive said aging personal computers and Microsoft's launch of Windows 7 will prompt companies to start spending on PCs next year.
The MSCI index of Asia Pacific stocks outside Japan rose 0.6 percent, nearing the cycle highs reached in August. The materials and consumer discretionary sectors, which have been very popular for the last six months, led the gains.
With valuations of the index on a price-to-1-year forward earnings basis back up near the bull market highs reached in November 2007, momentum rather than value are driving markets at this point.
CHINA STILL THE FOCUS
The Shanghai composite index of domestic Chinese stocks rose 0.9 percent as investors jumped back into property-related shares in the wake of Friday's draft changes raising the limit that foreign institutional investors are allowed to invest in the country's financial markets.
After plunging 22 percent in August, the Shanghai index has already bounced 8.6 percent after nearly five trading days in September.
BlackRock, one of the world's largest asset managers, said it had already begun buying A-shares before the announced change in QFII rules, but said the shift was a signal that Beijing did not want asset prices falling too much.
The Australian dollar was largely unchanged on the day at US$0.8518, after earlier touching the highest since September 2008.
Short-term traders on the International Monetary Market only slightly trimmed their net long Australian dollar positions, but slashed their net long euro positions and nearly trebled their net long yen positions, data up to September 1 showed.
Position adjustment was thus likely to blame for some broad weakness in the yen.
The U.S. dollar rose 0.25 percent to 93.17 yen, bouncing further from around 91.90 yen reached last Thursday, the lowest level since July 13.
U.S. crude for October delivery was steady at $68 a barrel, having spent most of the morning trading below that figure.
Some analysts were zeroing in on the more bearish parts of the August U.S. employment report which showed the unemployment rate rising more than expected, despite a bigger than forecast drop in payrolls contraction.
As the long Labor Day weekend comes to an end, we're looking at the end of peak gasoline demand season in the U.S., which means we're now entering a period of slack seasonal demand with refineries scaling back their production, said Toby Hassall, a commodities analyst at CWA Global Markets in Sydney.
High unemployment in the U.S. also underscores the weakness we're seeing in the consumer sector, which will put a handbrake on the overall recovery in energy demand even as we see industrial demand recovering.
U.S. gold futures for December delivery were down 0.3 percent at $993.90 per ounce, after settling down $1 at $996.70 on Friday. The contract rose to $999.50 on Thursday, the highest price since February.
Spot gold was around $991.60 per ounce.
(Additional reporting by Fayen Wong in PERTH; Editing by Neil Fullick)