Asian shares rose on Wednesday as firm demand at Spanish debt sales and positive U.S. corporate earnings boosted investor confidence in riskier assets.
European shares were heading for a firmer start with financial spreadbetters predicting that major European markets <.FTSE> <.FCHI> <.GDAXI> would open up to 0.2 percent. U.S. stock futures were also up 0.2 percent. <.EU> <.L> <.N>
MSCI's broadest index of Asia Pacific shares outside Japan <.MIAPJ0000PUS> climbed 1.2 percent, led by Australian shares <.AXJO> which charged to a two-week high, following a rally in European and U.S. equities the previous day that saw Wall Street stocks scoring their biggest gain in a month.
Japan's Nikkei average <.N225> jumped 2 percent. <.T>
There is a sense of relief after markets cleared one hurdle, with Spanish yields falling after successful short-term debt sales, said Hirokazu Yuihama, a senior strategist at Daiwa Securities in Tokyo.
Markets are undergoing a consolidation phase after a strong rally earlier in the year, and if Spain's bond auctions on Thursday pass without a problem, investors will likely become more committed to risk-taking, he said.
A rally in equities spilled over to Asian credit markets, with the spread on the iTraxx Asia ex-Japan investment-grade index tightening by 6 basis points.
Spain sold a more-than-planned 3.2 billion euros of 12- and 18-month bills on Tuesday due to good demand from domestic banks, easing some concerns about the country's refinancing ability.
Yields on 10-year Spanish government bonds fell back below the 6 percent level reached on Monday, when worries over the banking system, deficit and recession flared up. Spain faces a far more significant challenge on Thursday, with an auction of two- and 10-year bonds.
From Spain's debt sale to U.S. corporate earnings, all signs may have been positive but it's too early to get carried away, said Kim Byung-yeon, an analyst at Woori Investment & Securities. Though U.S. earnings all matched or exceeded expectations, the forecasts were very low to begin with.
The euro erased earlier gains to hold steady around $1.3120, but recovering from a two-month low near $1.2994 hit on Monday and returning to the middle its recent trading range.
As the dollar firmed against a basket of major currencies <.DXY>, riskier currencies such as the Australian dollar also pared earlier gains. The Aussie stood near $1.04.
IMF CAUTIOUSLY OPTIMISTIC
A German ZEW sentiment survey rising unexpectedly in April to its highest level since June 2010 helped turn around the bearish mood, while the International Monetary Fund also offered a cautiously optimistic view on global growth on Tuesday, as the U.S. recovery gains traction and dangers from Europe recede.
But it noted risks remained high and the situation was very fragile.
Europe is seeking to bolster its fragile safety net as highly indebted euro zone nations struggle to implement fiscal austerity measures, with differences developing over the allocation of funds from the euro zone's rescue fund.
The Sueddeutsche Zeitung daily said on Wednesday several euro zone countries and some officials of the European Central Bank wanted to allow the euro zone's rescue fund lend directly to troubled banks without going through the government of the country concerned. But the main donor nations, notably Germany, is adamantly opposed to any measures they regard as loosening governments' grip on structural reforms.
The IMF appeared to be inching toward a deal on increasing its financial firepower on Tuesday, with Japan, Sweden and Denmark committing a total of $77 billion to help contain the euro zone's debt crisis.
Global finance ministers meeting in Washington later this week could agree on the amount of the funds needed, leaving details to be fleshed out at a leaders' summit in June.
Commodities were capped, with U.S. crude futures ekeing out a 0.2 percent gain at $104.38 a barrel while Brent crude eased 0.1 percent to $118.68. Copper extended gains to add 0.2 percent to $8,090 a tonne.
Commodities are pressured by delayed profit taking which didn't occur last month, but expectations for global monetary easing to underpin growth are keeping support firm, said Naohiro Niimura, a partner at research and consulting firm Market Risk Advisory Co.
(Additional reporting by Joonhee Yu in Seoul; Editing by Alex Richardson)