Tokyo - Asian shares rallied more than 3% and the euro
steadied on Friday on hopes Greece will abandon a proposed referendum on a
European Union bailout, but investors remained cautious over a confidence vote
scheduled for later in the Greek parliament.
Greece’s abrupt call for a referendum, just days after a
deal was struck to save the debt-stricken country from defaulting, sparked
panic in global financial markets, prompting EU leaders to talk of a possible
Greek exit from the eurozone to preserve the single currency.
Greek Prime Minister George Papandreou bowed to cabinet rebels
and agreed to step down and make way for a negotiated coalition government if
his Socialist lawmakers back him in a confidence vote on Friday, raising hopes
for a political consensus on the EU rescue framework.
“The market regained some calm but uncertainty remains over
the outcome of today’s confidence vote,” said Yuji Saito, director of the
foreign exchange division at Credit Agricole Bank in Tokyo. “Uncertainty at
this point entails risks, as it means delays in the efforts (to resolve the
debt crisis).”
MSCI’s broadest index of Asia Pacific shares outside Japan
jumped 3.1%, led by a more than 4% jump in materials as copper and oil
rebounded. The index’s energy sector soared 3.7%, while the technology sector
gained 3.4%. Japan’s Nikkei share average rose 1.9%.
European shares were expected to make modest advances from
Thursday’s rally. Financial bookmakers called the FTSE 100 to open up 0.3%,
Germany’s DAX to open up 0.5% and France’s CAC-40 to gain 0.3%.
Investors may be hunting for a bargains, but underlying
concern about whether measures can really be implemented to rescue Greece from
its debt crisis remained intact, said analyst Woon Khien Chia of the Royal Bank
of Scotland in Singapore.
“Nobody wants to take very big positions,” she said, adding
that even after the basic framework was agreed to rescue Greece, questions have
already been raised about who was going to fund the bailout.
Late in October, eurozone leaders struck a deal with private
banks and insurers for them to accept a 50% loss on their Greek government
bonds under a plan to lower Greece’s debt burden, while asking Greece for
severe austerity measures.
They also agreed that the European Financial Stability Facility, a bailout fund, would be leveraged to give it firepower equivalent to about €1 trillion.
G20 leaders meeting in southern France will try to look
beyond the Greek drama that has shaken their annual gathering and agree on
measures that will convince markets the risk of further eurozone contagion can
be stemmed.
ECB cut supports
Market sentiment was also supported by the European Central
Bank’s surprise rate cut of 25 basis points on Thursday, the first meeting
under new President Mario Draghi. Draghi said the eurozone could enter a “mild
recession” later this year.
“The ECB’s surprise move to cut rates suggested it took a
preemptive move as it forecast growth slowdown, which gave a positive surprise
to the market,” Credit Agricole’s Saito said.
The euro steadied against the dollar around $1.38.
Hong Kong’s benchmark Hang Seng Index jumped more than 3%,
recovering almost all of this week’s losses, while the iShares A50 China
tracker, an exchange-traded fund in Hong Kong that provides the most direct
exposure to mainland markets, hit its highest since mid-August.
The ECB’s rate cut bolstered Shanghai-traded commodities
such as iron, zinc and copper. The most-active January copper contract on the
Shanghai Futures Exchange jumped as much as 4.5%.
Brent crude held above $110 a barrel and US crude rose 0.2%
to $94.26.
Investors’ appetite eased for protection in the options
market against losses, with the CBOE Volatility index VIX - a measure of
expected volatility in the S&P 500 over the next 30 days often dubbed Wall
Street’s “fear gauge” - falling to 30.50 on Thursday from 32.74 the day before.
The VIX was below 30 for most of the time in the 15 years up to 2008, before being driven close to 90 by the global financial crisis in October that year. It hit this year’s peak at 48 in August.
As optimism buoyed riskier assets, Asian credit markets
stabilised, with the spreads on the iTraxx Asia ex-Japan investment grade index
narrowing sharply by more 20 basis points. The index is a gauge of investor
risk appetite.
“Its a bit more positive this morning although headline
risks are still alive. It’s just one step forward and two steps back,” said a
Singapore based trader with a European bank.