* MSCI Asia ex-Japan up 0.3 pct, Nikkei rises 1.4 pct
* Euro up tepidly on speculation ECB to act next week
* Nervous markets may falter ahead of divided EU summit
* Commodities rise cautiously after upbeat US data
* European shares likely to open higher
By Chikako Mogi
TOKYO, June 28 (Reuters) – Asian shares rose on Thursday on
encouraging U.S. economic data, but prices were capped with
investors tense ahead of a European Union summit of leaders
deeply divided on how to tackle the long euro zone debt crisis
and stop it from spreading.
European shares were likely to extend Wednesday’s gains
modestly, with spreadbetters predicting that region’s major
markets would open as much as 0.3
percent higher. U.S. stock futures were up 0.1 percent.
On Wednesday, European shares rebounded and Wall Street
stocks logged their largest gain in a week after data showed
stronger-than-expected demand for long-lasting U.S. manufactured
goods in May, a rising gauge of planned business spending and
increased pending home sales in May.
MSCI’s broadest index of Asia-Pacific shares outside Japan
rose as much as 0.7 percent before paring gains
to trade up around 0.3 percent while Japan’s Nikkei average
advanced 1.4 percent.
“It’s completely a reflection of the fact the European
markets rebounded a bit yesterday,” said Guy Stear, head of
research with Societe Generale in Hong Kong.
“People don’t want to go short into the meeting, that’s why
we have a bit of a short-covering bounce. There’s always a
potential in Europe for a surprise,” even if there were few
signs for any agreement to be reached at the meeting, he said.
The bright sentiment may evaporate later on Thursday,
however, when the two-day EU summit starts in Brussels (1300
GMT), with Germany, France and Italy openly divided over putting
the priority on the bloc’s long-term fundamental problems ahead
of calls for emergency action.
German Chancellor Angela Merkel offered no immediate moves
to ease the tension, while EU Economic and Monetary Affairs
Commissioner Olli Rehn said Europe would work at the summit on
short-term steps to relieve market pressure on countries at
risk.
EU leaders have met 20 times to try to resolve a crisis that
has spread across Europe since beginning in Greece in late 2009.
EURO FLOATS AIMLESSLY
The euro rose 0.4 percent to $1.2514, still not far
from its lowest in more than two weeks at $1.2441 hit on
Tuesday, underpinned partly by speculation the European Central
Bank would take action next week to ease European banking and
debt market strains.
“European policymakers have a good track record for
underwhelming with their response to the banking and sovereign
crisis to date,” ANZ Bank said in a research note.
“Spanish and Italian bond yields will remain vulnerable to
whatever is delivered. Even if there is a good outcome, the
uncertainty surrounding the ability to implement will be high.
The Europeans need a strategy to cap bond yields or else another
sovereign will be in need of a rescue package,” it said.
If the EU summit disappoints, focus may turn to the ECB to
deliver action, such as an interest rate cut.
“The market is already expecting disappointment from the
summit. But I think the euro will be supported by expectations
that the European Central Bank will take some measures next
week,” said a currency trader at a Japanese bank.
Italy’s six-month borrowing costs rose to 2.957 percent at
auction on Wednesday, their highest since December. Rome faces a
more challenging test of investor appetite when it offers
five-year and 10-year debt for up to 5.5 billion euros on
Thursday.
Europe’s debt turmoil pushed Japanese fund managers’
weightings in domestic stocks and bonds to record highs in June.
COMMODITIES CAN WAIT
U.S. crude futures extended gains from Wednesday, rising 0.4
percent to $80.55 a barrel, but Brent futures
pared earlier gains to stand nearly flat at $93.48.
London copper was up 0.2 percent at $7,420 a tonne
on the upbeat U.S. data, which supported demand for industrial
metals sensitive to the economic outlook.
Naohiro Niimura, a partner at Tokyo-based research and
consulting firm Market Risk Advisory Co, said investors should
not necessarily rush to buy commodities yet because prices could
test lower still depending on the EU summit’s outcome.
“Policymakers won’t opt for the worst case scenario if they
are rational, but over the past year, politicians in each
country showed they don’t or can’t make economically viable
decisions,” Niimura said.
“So, if there is no urgent need to tap raw materials or
commodities products, then one should wait at least until the
ECB’s meeting,” he said, adding that investors can use put or
call options to hedge against price swings.
Asian credit markets firmed slightly, with the spread on the
iTraxx Asia ex-Japan investment-grade index
narrowing by 3 basis points.
