Global Markets: Asian shares rebound,easy policies feed risk taking

The February HSBC Services Purchasing Managers8217; Index PMI fell to 52.1 from January8217;s 54.0,after seasonal adjustments,in line with slower factory activity that suggests a modest rebound in the world8217;s second-biggest economy this year.

Outgoing Premier Wen Jiabao said on Tuesday in remarks prepared for the opening of China8217;s annual parliament meetings that Beijing would boost fiscal spending in 2013 in a bid to deliver economic growth of 7.5 percent for the year.

8220;The Chinese economy will decelerate from the second quarter,but the slowdown is not significant enough to derail the economic recovery,8221; said Dariusz Kowalczyk,senior economist and strategist for non-Japan Asia at Credit Agricole CIB in Hong Kong,adding that Monday8217;s sell-off in Chinese shares was 8220;justifiable8221; because markets tend to move ahead of growth direction.

8220;As property curbs are expanded,real estate construction may well slow to the point of adding additional downward pressure on the economy. However,the 7.5 percent growth target announced today is safe,8221; he said.

Australian stocks outperformed their Asian peers with a 1.5 percent rally,led by financial stocks ahead of an interest rate decision by the Reserve Bank of Australia at 0330 GMT,while retail stocks also soared on data showing a tick-up in consumer spending in January.

The RBA kicks off a series of monetary policy meetings taking place this week. Major central banks around the world are expected to maintain a dovish stance,given fragile economic conditions,political uncertainties in Europe,and U.S. budget wrangling.

Growth concerns prompted initial caution on Wall Street,but investors took advantage of the decline to jump in,even though indexes hover near historic or multi-year highs. Analysts also say none of the uncertainties is seen as a risk serious enough to trigger a financial crisis.

Janet Yellen,the Federal Reserve8217;s vice chair,said on Monday the U.S. central bank8217;s aggressive monetary stimulus is warranted given how far the economy was operating below its full potential. Her comments helped support investor sentiment.

Japan8217;s Nikkei stock average rose 0.8 percent. It scaled a fresh 53-month high on Monday

8220;Despite spending cuts in the U.S.,a lack of any kind of political resolution in Italy and weaker data in Asia,we just can8217;t get a proper 8216;risk-off8217; mood going 8230; as mad money quantitative easing and zero interest rate policy trumps every other concern,8221; said Kit Juckes,strategist at Societe Generale in a note to clients.

UNCERTAINTIES

Aside from the Chinese government8217;s action to cool the overheated property market,there is concern about U.S. growth slowing after the automatic 8220;sequestration8221; spending cuts were allowed to kick in starting March 1.

Ongoing political turmoil in Italy also dented investor appetite for risk as last month8217;s inconclusive election could pave the way for another vote within months.

Italy8217;s 10-year government bond yields rose to 4.881 percent on Monday,but expectations the European Central Bank would use its scheme to help fund struggling euro zone nations underpinned investor confidence and capped the yields from rising further.

The euro held steady around 1.3024 and the dollar was also steady against a basket of six major currencies.

The yen firmed 0.2 percent against the dollar to 93.32 . The benchmark 10-year Japanese government bond yield fell as low as 0.585 pecent earlier,its lowest since June 2003 on expectations for bolder Bank of Japan easing.

Monetary easing must accompany fiscal spending to help Japan escape deflation because increased spending could cause bond yields and the yen to rise,Kikuo Iwata,the government8217;s nominee to become central bank deputy governor,said on Tuesday.

The ECB holds its policy meeting on Thursday,and while few expect the central bank to cut interest rates this week,many see such an action to come sooner than later.

The RBA is expected to keep its cash rate unchanged at a record low 3.0 percent,having already lowered it by 175 basis points in the past 15 months.

Later in the week the BOJ and the Bank of England hold their meetings.

Gold has been lackluster as global risk aversion abated. Data showed holdings of the world8217;s largest gold-backed ETF,the SPDR Gold Trust,posted a ninth consecutive daily decline on Friday after reporting the biggest ever one-month drop in February.

Spot gold was up 0.2 percent at 1,576.71 an ounce early on Tuesday.

U.S. crude was up 0.3 percent at 90.36 a barrel while Brent rose 0.4 percent to 110.53.