Asian shares rose on Thursday on bargain hunting as hopes grew for more US stimulus to support growth and new European measures to contain the Eurozone’s debt woes, but sentiment remained frail.
Worries about the Euro crisis eased somewhat on comments from European Central Bank (ECB) Governing Council member Ewald Nowotny who said there are arguments for giving Europe's permanent rescue fund a banking licence – an idea that the ECB has rejected so far. A banking licence would boost the fund's firepower by allowing it access to cheap ECB funding.
Borrowing costs in Spain, which is facing snowballing regional debts and a banking sector struggling to clean up bad loans, retreated slightly on Wednesday while safe-haven US Treasury yields also inched up from historic lows.
Risk assets plummeted over the past week as concerns intensified that Spain, the Eurozone’s fourth-largest economy, might need to seek a full bailout. If it did, that would threaten to deplete Europe's rescue fund just when other highly indebted states were fighting to fend off surging borrowing costs.
"The slight pull-back in Eurozone borrowing costs fed some relief, giving investors an impetus to hunt for cheapened stocks as Asian equities have been oversold in terms of valuations," said Hirokazu Yuihama, a senior strategist at Daiwa Securities.