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Global shares rise on higher U.S. market, Europe worries cap June 13, 2012

BY: Chikako Mogi

TOKYO (Reuters) – Asian shares rose on Wednesday, following gains in European and U.S. markets where bargain hunters bought beaten down stocks, but markets remained vulnerable to the euro zone’s debt woes as Spanish yields hit record highs on worries over banks.

MSCI’s broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> inched up 0.2 percent, after Wall Street stocks gained more than 1 percent on Tuesday, led by cyclical sectors.

Japan’s Nikkei average (.N225) opened up 0.2 percent. (.T)

Asset prices have see-sawed as optimism and disappointment have taken turns by the day, reflecting a high level of unease in markets about whether contagion from Spain’s banking crisis can be contained and whether Greece’s June 17 election will see it stay in the euro bloc.

Risk appetite has been curbed by a lack of details in a loan agreement to help Spain’s banks recapitalize, and concerns that the scheme could further aggravate Madrid’s fast-rising public debts and force it to seek bailouts similar to those for Greece, Ireland and Portugal.

Spain’s 10-year bond yield rose to 6.86 percent on Tuesday, surpassing peaks seen in November last year to hit the highest since the 1999 launch of the euro.

That capped the euro, which traded at $1.2495, off Tuesday’s low of $1.24428.

“There is nothing substantial in the recovery in sentiment, and it appears only to be supported by hopes Europeans will take more measures to ensure the Spanish aid will work while seeking to buy time for Greece,” said Yuji Saito, director of foreign exchange at Credit Agricole Bank in Tokyo.

“There might also be some hopes the G20 will put pressure on Europe. Given so much uncertainty, players are quick to take profits whenever there is a rebound,” he said.

Despite a huge amount of positions betting on the euro’s further decline, the currency’s downside has been limited by options lined up around $1.25 as well as repatriation ahead of the half-year end in June by European financial institutions and companies, Saito said.

Speaking ahead of a June 18-19 summit of Group of 20 leaders in Mexico, Mexican President Felipe Calderon said on Tuesday European powers must quickly finalize plans to support Spanish banks, and said he expected important progress to be made in resolving the 2-1/2 year-long crisis.

Europeans, on the other hand, did little to soothe investor jitters, with Austria’s finance minister saying Italy may need a financial rescue because of its high borrowing costs, while the Dutch finance minister said the euro zone was “still far from stable”.

The European Central Bank said it stood ready to act should the situation in the euro zone deteriorate further. U.S. crude eased 0.3 percent to $83.09 a barrel, after hitting a 2012 low of $81.07 in intraday trading, its lowest since October 6. Brent crude was off 0.1 percent at $97.08 a barrel, after settling at $97.14, the lowest settlement since January 2011.

The cost of insuring against corporate and sovereign defaults in Asia eased slightly on Wednesday, with the spread on the iTraxx Asia ex-Japan investment-grade index narrowing by 3 basis points.

(Editing by Richard Pullin)


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