Asia stocks at 1-month high; euro rebounds
Asian stocks rose to a one-month high on Monday, led by a rally in the technology sector, while the euro rebounded in thin trade, squeezed higher by dealers forced to close bets against the currency.
Major European stock futures were up as much as 1.1 percent as investors bought back risky assets.
Global equities are set for a fourth consecutive session of gains, driven mainly by the materials sector, which closely follows business cycles. The same sector has been heavily sold since April, as investors cut exposure to riskier assets, fearing the worldwide recovery was losing momentum.
However, tech stocks were leading major indexes in Japan and South Korea higher on Monday, after semiconductor chipmakers last week gave positive news about demand, helping Wall Street recover early losses on Friday.
The fundamental picture has not changed much, with many economists still expecting the U.S. economy to grow around 3 percent this year and next, even after May U.S. retail sales unexpectedly fell for the first time in eight months.
"We're seeing pretty active short-covering on a sense that recent risk avoidance moves were exaggerated, leaving markets oversold," said Takashi Ushio, head of the investment strategy division at Marusan Securities in Tokyo.
Japan's Nikkei share average rose 1.8 percent, with tech names TDK and NTT Data among the biggest boosts to the index.
The market for semiconductors will likely grow 6 to 7 percent for the next five years, helped by strong demand in China, Morris Chang, Taiwan Semiconductor Manufacturing Co's chief executive and chairman, told the Financial Times.
TSMC is the world's biggest contract chipmaker.
ASIA STOCKS STILL CHEAP
The MSCI index of Asia Pacific shares outside Japan climbed 1.4 percent to the highest since May 19.
The index is trading at 11.5 times its earnings expected 12 months forward, a bit higher than at the start of June but still cheaper than the 5-year average of 13.2 times, Thomson Reuters I/B/E/S data showed.
With bets against the euro near record highs and bets on the Australian dollar slashed last week, dealers took advantage of the relative quiet and trimmed their positions.
The euro was up 0.6 percent to $1.2192, having earlier triggered small stop-loss orders all the way up to around $1.2207.
This week the focus for the euro will be a meeting of European Union leaders on Thursday to convince sceptical investors they can tighten budgets to contain a sovereign debt crisis and boost growth at the same time.
"I suspect there are euro short positions left in markets so there will probably be a bit more short-covering," said Daisuke Karakama, a market economist at Mizuho Corporate Bank in Tokyo.
"But its rebound will run out of gas. There will be an EU summit this week, but European policymakers appear to have run out of policy steps for now."
The Australian dollar was up 0.6 percent to US$0.8570, having strengthened by nearly 4 cents in the last week. It peaked just below $0.94 in April and then found support at $0.8065-80, making chartists look for signals that it can recover higher.
Short-term investors in the International Monetary Market cut their bets on the Australian dollar in half in the week to June 8, suggesting that positioning will not be an obstacle to further strength in the currency.
The Korean won leapt around 1.9 percent, a relief rally after Seoul announced foreign exchange regulations over the weekend that were largely in line with expectations.
The weaker dollar was one of the factors pushing up oil prices. U.S. crude for July delivery rose 1.4 percent to $74.79 a barrel.
Since crude traded at a 10-month low on May 20, it has drifted higher and gained $10.