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Tokyo - Asian shares recovered on Thursday on brightening prospects for Greece to secure a crucial bond swap to avoid a messy default and US data suggesting a recovery in the labour market ahead of key jobs figures.
However, other assets, from copper and gold to oil, along with commodity currencies such as the Australian dollar, were more subdued, trading steady to slightly lower as investors remained cautious.
The Greek debt swap deal and US nonfarm payrolls, due on Friday, are seen as a test case for gauging whether markets can build on the optimism of recent months and overcome patchy growth figures which have dented sentiment.
The European Central Bank is expected to hold interest rates steady at a policy meeting later in the day and some analysts expect an assessment of last month's second liquidity injection, which helped soothe market jitters and boost risk appetite.
The MSCI Asia Pacific ex-Japan index gained 0.8%, snapping a three-day losing streak, while Japan's Nikkei average rose 1.3% to also break three days of losses.
The euro steadied at $1.3150, recovering from a three-week low of $1.3096 touched on Wednesday. The Australian dollar came off a six-week low of $1.0508 hit on Wednesday, but eased 0.1% to $1.0566 after local employment suffered an unexpected drop of 15 400 in February and nudged the jobless rate up a tick to 5.2%.
"Investors are cautiously following the risk-on momentum," said Goro Ohwada, president and CEO at Aino Investment Corp, a Japan-based fund of hedge funds, pointing to a belief by some investors that equities will remain supported in the lead-up to the US presidential election.
"Ample liquidity is also supporting risk appetite, but given the vulnerable nature of the current uptrend, I'd also put money in a category of assets unrelated to financial markets, such as natural gas and some commodities," he said.
Copper was steady around $8 311 a tonne while oil also held near late New York levels. Gold was little changed at $1 685 an ounce.
The yen slipped to around ¥81.32 against the dollar from around ¥81.13 after data showed Japan logged a record current account deficit in January. It last stood down 0.2% at ¥81.24.
Greece keeps hopes
Major banks and pension funds, representing about 40% of Greece's outstanding debt, threw their weight behind Athens' bond swap offer to private creditors on Wednesday, raising the likelihood that the deal will go through and a €130bn international bailout package would be secured. The offer expires at 20:00 GMT on Thursday.
"Any suggestion the deadline might be extended would probably send shivers down the spine of any 'risk-on' traders and EUR would likely suffer badly," BNP Paribas analysts warned.
In addition to hopes over Greece, US and European stocks rose on Wednesday after the ADP National Employment Report showed the private sector added 216 000 jobs last month, topping economists' expectations for a gain of 208 000.
Friday's report is expected to show a gain of 210 000 in nonfarm payrolls, with a gain in the private sector of 225 000 jobs offsetting a modest decline in government jobs.
Optimism kept oil prices steady on Thursday, with Brent crude holding near $124 a barrel after settling up 1.75% at $124.12 on Wednesday. US crude was steady above $106 a barrel after settling up 1.4% on Wednesday. The geopolitical risk premium fell on news that major powers had accepted Iran's offer for more talks about its nuclear programme.
Sentiment in Asian credit markets also improved, narrowing the spread on the iTraxx Asia ex-Japan investment-grade index by about 4 basis points early on Thursday.
Asian bond issuance has been strong so far this year, reflecting investor appetite for higher yields.
"This is really the best time before the US long term yields start going up again. You've got better data coming out of the US and that's why we are seeing a rush of issuers tapping before rates start moving up in the dollar bond market," Anthony Chan, Hong Kong-based strategist with AllianceBernstein, said.
"At the same time risk appetite has improved significantly from last year, so high yield bonds are appealing to investors."
