Asian stocks up on Europe, credit tightens

Asian shares followed global stocks higher on Thursday, buoyed by a recovery across a broad range of assets on optimism over Europe's efforts to aid the region's financial sector and US data suggesting the economy could avoid recession.

An easing of risk aversion, after an intensive sell-off earlier this week on fears that Europe's debt problems could trigger a new global financial crisis, helped boost commodities while tightening the Asian credit markets sharply.

MSCI's broadest index of Asia Pacific shares outside Japan rose 1.4 percent, moving away from a two-year low hit on Tuesday.

The Nikkei stock average rose 1.4 percent on Thursday, tracking commodity- and tech-led gains in the United States.

MSCI's all-country world index rose 2 percent on Wednesday.

German Chancellor Angela Merkel said on Wednesday that Berlin was ready to recapitalise its banks if needed, adding some more reassurance following an agreement on Tuesday by European finance ministers to

safeguard banks in the face of mounting concerns about a Greek default.

Further adding to positive sentiment was data showing growth in the US service sector stood steady in September and private hiring picked up, suggesting the economy was not yet slipping into recession.

Asian credit markets reflected easing strains, with the iTraxx Asia ex-Japan investment grade index narrowing by 16 points on Wednesday after a sharp widening at the start of this week.

US crude oil steadied above $79 (Dh290.16) a barrel on Thursday as a surprise drawdown in U.S. crude inventories helped offset pressure from the euro debt crisis. On Wednesday, Brent crude bounced more than 2 percent to top $102 a barrel and US benchmark futures jumped 5 percent.

Investors were likely to remain cautious about whether the market relief would be sustained, ahead of key events including the European Central Bank's policy meeting later this session, the last meeting held under presidency of Jean-Claude Trichet, and Friday's US non-farm payrolls.

The euro was steady against the greenback in early Asian trade amid uncertainty ahead of the ECB meeting which could see rates cut or the rebirth of long-term lending to banks. The euro is well off a nine-month trough of $1.3144 struck this week.

Follow Emirates 24|7 on Google News.