Markets cheer positive US, German data, Greek commitment

Markets consolidated on Wednesday as investors waited on Greece to demonstrate its commitment to deliver harsh reforms in exchange for a vital rescue deal, while European officials scaled back expectations that Athens will live up to its promises.

Positive German and US data and measures to pump up global liquidity, including fresh steps by the Bank of Japan (BOJ) on Tuesday, helped ease some tension sparked by Moody’s threat to cut the credit rating of non-euro zone member Britain.

Expectations that the European Central Bank would supply ample liquidity again later this month continued to underpin lower-rated euro zone debt markets, keeping their refinancing efforts on track and reducing investors’ worries.

MSCI’s broadest index of Asia Pacific shares outside Japan rose 0.8 percent. Japan’s Nikkei rose to six-month highs on the BOJ’s surprise easing action, which pushed the yen to a three to half month low against the dollar of 78.67, bolstering exporters.The index was jumped 1.8 percent, outperforming its Asian peers.

The BOJ’s aggressive quantitative easing and a decision to set an inflation goal of 1 percent to help pull the economy out of deflation had a rare global impact, mirroring markets’ heavy reliance on central bank funding to ride out uncertainty while the euro zone debt crisis drags on.

Analysts also noted that share prices had risen in Asian countries that have introduced inflation targeting. “The adoption of such targets coincided with the burst of the IT bubble which sent global equities lower, but stock markets of these Asian countries were the first to emerge from the downtrend,” said Eiji Kinouchi, chief technical analyst at Daiwa Securities.

“Inflation targeting is effective against prices as well as for growth rate,” he said, adding that the BOJ’s announcement could be a turning point for Japanese shares. The euro inched up 0.1 percent to $1.3145, off Tuesday’s low around $1.3080.

“An initial reduced risk sentiment was tempered by the BOJ adding to global liquidity and so offsetting the European credit rating downgrades by Moody’s,” ANZ said in a research note. Other assets -copper, oil and gold- also rose along with the recovery in the euro and equities US crude edged up 0.3 percent to $101.01 a barrel and Brent crude added 0.4 percent to $117.87.

London copper gained 0.5 percent to $8,455 a tone, with markets also seeking clues on Chinese demand. Spot gold added 0.3 percent to $1,724 an ounce but investors refrained from taking bets before the situation in Greece becomes clear.

Reuters