However, with Spain’s borrowing costs hitting another record high despite a US$125 billion bank bailout, traders remain on edge while German Chancellor Angela Merkel warned leaders not to place too many expectations on Berlin.
Sydney advanced 0.37%, or 15.1 points, to 4,057.3, while in the afternoon Hong Kong climbed 1.23% and Shanghai was up 0.29%.
Tokyo closed flat, nudging 0.43 points up to 8,569.32, with dealers unimpressed with the Bank of Japan’s decision to hold off any fresh stimulus moves for the time being.
Seoul closed 0.71%, or 13.32 points lower at 1,858.16.
In the United States weekly initial jobless claims rose more than expected. Consumer prices fell in May for the first time in two years, driven by falling gasoline prices, but core inflation rose 0.2% for the third straight month.
The numbers sparked speculation that the US central bank would start a third round of stimulus known as quantitative easing in a bid to kickstart the world’s biggest economy.
“Hopes for more easing steps bolstered risk appetite” in New York, said Takashi Hiroki, Monex Inc chief strategist in Tokyo. “Market sentiment is brighter,” he told Dow Jones Newswires.
On Wall Street the three main indexes advanced on hopes for more cash flooding into the market. The Dow gained 1.24%, the S&P 500 climbed 1.08% and the Nasdaq added 0.63%.
“Sentiment seemed to strengthen on hopes that underwhelming data might compel the Fed to implement another round of quantitative easing when they meet next week,” said Briefing.com.
In Britain finance chief George Osborne and Bank of England governor Mervyn King said they would flood banks with about US$155 billion in a bid to jump-start lending to households and businesses and fend off a potential storm from Europe.
But while investors absorbed the possibility of fresh cash in the system, Europe’s troubles tempered sentiment.
All eyes on Merkel
Yesterday, the interest rate on Spanish 10-year government bonds soared to 6.9650%, the highest since the birth of the single currency in 1999, and close to the danger-zone 7.0% considered unsustainable to service debts.
The jump came after Moody’s on Wednesday slashed Spain’s sovereign debt rating by three notches, saying the bank bailout would put extra strain on the country’s already weak finances.
Greek shares soared more than 10% on speculation that voters would elect a government committed to austerity policies key to the country receiving further bailout aid and staying in the euro.
The surge comes just days ahead of Sunday’s vote, which was called after an inconclusive poll at the start of May that sent shockwaves through global markets amid fears a Greek euro exit would have calamitous knock-on effects.
Merkel said “all eyes” would be on her at a key G20 summit next week as she looked to play down expectations that Europe’s top economy and effective paymaster could conjure up all the answers.
“Germany is strong, Germany is an engine of economic growth and a stability anchor in Europe,” she said.
“But Germany’s powers are not unlimited,” she warned in a speech to lawmakers ahead of the June 18-19 G20 meeting in Mexico.
On currency markets the euro bought US$1.2627 and 99.62 yen, compared with US$1.2630 and 100.21 yen in New York late yesterday.
The dollar stood at 78.93 yen, down from 79.34 yen.
And the Australian dollar rose back above parity with the greenback, trading at US$1.0016, up from US$0.9948 yesterday, having fallen in recent weeks.
Oil prices rose. New York’s main contract, light sweet crude for delivery in July, was up 68 US cents to US$84.59 a barrel and Brent North Sea crude for August delivery gained 76 US cents to US$97.93 in the afternoon.
Gold was worth US$1,625.35 an ounce at 0630 GMT, compared with US$1,620.10 late yesterday.
In other markets:
- Taipei rose 1.14%, or 80.73 points, to 7,155.83. Hon Hai Precision rose 2.92% to Tw$84.5 while TSMC was 1.39% lower at Tw$78.1.
- Wellington rose 0.91%, or 30.99 points, to 3,447.07. Fletcher Building gained 2.28% to NZ$6.29, Telecom rose 3.13% to NZ$2.475 and Contact Energy was up 1.92% at NZ$4.78.