Asian shares extended gains on Friday on hopes the global recession is receding after key U.S. companies beat earnings expectations, but deadly blasts in Jakarta weighed on Indonesian stocks and the rupiah.
The yen rose as Japanese exporters sold foreign currencies, with risk appetite dulling in the wake of the explosions and ahead of more U.S. bank earnings. Oil fell toward $61.
European shares were set to edge higher for their fifth straight day of gains, echoing Asian and U.S. gains, financial bookmakers said.
Blasts at the Ritz-Carlton Hotel and the Marriott Hotel in central Jakarta killed 9, police said. A car bomb exploded along a toll road, and Indonesia's Metro TV said two had been killed.
Jakarta stocks <.JKSE> fell 1.2 percent and the rupiah, which has been Asia's best performing currency so far this year, lost 1 percent before paring losses.
Share markets have been keenly watched as a barometer of investor confidence, but risk appetite has waned as market players awaited earnings due out later on Friday, including Citigroup
Already this morning there was a bit of profit-taking and a slight move away from risk trades, said Mitul Kotecha, head of FX strategy at Calyon in Hong Kong.
The blasts have added to this direction in terms of risk trades coming off, he said, while noting it wasn't a big move.
Strong earnings for major U.S. companies continued to cheer global markets on Thursday as the quarterly reporting season moved into higher gear, pushing U.S. share indexes up about 1 percent overnight.
JPMorgan Chase & Co
But amid the good news, JP Morgan reported a surge in consumer credit losses, showing the economic recovery still has a long way to go, and Citigroup and Bank of America were expected to post relatively weaker performances, one trader said.
Earnings from U.S. banks have been upbeat, but there are concerns that the positive results could be limited to the second quarter, said Takahiko Murai, general manager of equities at Nozomi Securities.
Asian shares ex-Japan rose 0.7 percent and looked on track for their highest close in a month. The index rose over 5 percent on the week, taking its gains so far this year to around 34 percent. <.MIAPJ0000PUS>
Asia ex-Japan equity funds were the only ones of the four major emerging markets fund groups to see inflows during the second week of July, according to global fund tracker EPFR, while Japan equity funds recorded inflows for the third straight week.
Japan's benchmark Nikkei <.N225> clawed up 0.6 percent to 9,395.32. Gains have been limited by political uncertainty since Monday, when embattled Prime Minister Taro Aso said he aimed to call an election for August 30, despite grim prospects for his long-ruling conservative party.
Korean shares <.KS11> climbed 0.6 percent after rising as far as 1,445.60, a new 2009 high, with gains fueled by tech shares such as LG Display <034220.KS> and LG Electronics <066570.KS>.
RUPIAH FALLS, YEN GAINS
The Indonesian rupiah fell 0.7 percent to 10,200 per dollar in the wake of the explosions, prompting state banks to sell dollars to support it, traders said.
I would say it damages foreign investor confidence since the attacks appear aimed at Westerners, but not shatters it, so long as there is no further violence for some time, said Sean Callow, a currency strategist at Westpac in Sydney.
The dollar, which has been a defensive play for investors in the global economic crisis, hit a six-week low at 79.131 against the basket of six currencies <.DXY> on Thursday.
It later rebounded after data showed factory activity in the U.S. mid-Atlantic region contracted for a 10th straight month in July, and was holding at 79.364 at 2.05 a.m. ET.
But the yen edged up against a range of currencies as risk appetite abated, although it had pared earlier gains.
The greenback edged down against the yen, slipping 0.2 percent to 93.72. The Australian dollar slipped 0.6 percent to 75.04 yen while the kiwi edged down 0.6 percent to 60.34 yen.
Yields on U.S. 10-year Treasury notes stood at 3.550 percent, down nearly one basis point from U.S. trade but up from a two-month low of 3.26 percent hit on Monday.
September JGB futures rose 0.03 point to 138.62 after a smooth five-year debt sale on Thursday, still down from a 3-1/2-mth peak of 138.97 hit last week.
Spot gold was at $937.20, edging up from Thurday's New York notional close of $936.35.
(Additional reporting by Shinichi Saoshiro, Charlotte Cooper and the Jakarta newsroom; Editing by Kim Coghill)