Asia shares up, euro rebounds as reports temper Italian debt fears (Update)

MSCI's broadest index of Asia-Pacific shares outside Japan was all but flat, while South Korean stocks eased 0.31 percent. Japan's Nikkei was closed for a holiday, while E-Mini futures for the S&P 500 barely budged.

SYDNEY: Asian shares reversed early losses while the euro rebounded from six-week lows on reports Italy will cut its budget deficit at a faster pace than expected, raising hopes Rome could stave off a problematic debt blow-out.

Italy will reduce its budget deficit to 2 percent of gross domestic product (GDP) by 2020 from the earlier announced 2.4 percent, local newspaper Corriere Della Sera reported, a pledge that boosted the euro.

The single currency has been rattled by concerns that a significant increase in the Italian budget will deepen the country's debt and deficit problems, and by extension those of the European Union.

The euro jumped 0.3 percent on the news to $1.1585, snapping five straight days of losses that had pushed it to a six-week trough of $1.1506.

MSCI's broadest index of Asia-Pacific shares outside Japan climbed 0.2 percent with Hong Kong's Hang Seng index up 0.5 percent and Singapore shares adding 0.9 percent.

Japan's Nikkei pared early losses and was last a shade weaker while Australian shares gained 0.3 percent. E-Minis for the S&P 500 the Dow also reversed losses gain 0.2 percent each.

China's financial markets are closed for the National Day holiday and will resume trade on Oct. 8. South Korea was also closed for a public holiday.

"The big market mover in the last 24 hours has been Italy and the concerns around its debt so the latest news is being considered a much better outcome than was priced into the market," said Kyle Roda, Melbourne-based analyst at IG.

"The news has prompted some buying, we're seeing a bit of a relief rally."

Globally, risk appetite was hit after European Union officials expressed concerns about Italy's budget plan, which would widen the deficit significantly.

TRADE WAR CONTINUES

Generally, sentiment was still jittery though even as a new U.S.-Mexico-Canada trade agreement appeared to ease global trade tensions. A controversial clause in the trilateral pact put the focus back on the Sino-U.S. tariff dispute.

Chinese markets have taken a hammering this year as investors fretted the trade dispute could put a significant dent on growth.

"Many deadlines have come and gone and the trade war continues," said Ethan Harris, global economist, BankofAmerica-Merrill Lynch.

"However, in this case we have marked our calendar for November 30," the date when the U.S. President Donald Trump and his Mexican and Canadian counterparts are likely to sign the new trilateral trade pact.

"It is also the day Trump and Chinese President Xi Jinping are attending the G-20 meetings. (We) continue to believe that is the first plausible date for serious negotiations."

The dollar's index, which measures the greenback against a basket of major currencies <.DXY>, was last at 95.314, pulling back from six-week highs of 95.744 set on Tuesday.

Gold traded near its highest level in more than a week as investors sought refuge in the safe haven after equity markets weakened. Spot gold was last at 1,207.19 after adding 1.3 percent to $1,208.23 an ounce overnight.

Oil prices held close to four-year highs on supply worries due to Washington's sanctions on Iran.

Brent added 5 cents to $84.85 per barrel, not far from a four-year high of $85.45 touched earlier in the week. U.S. crude futures inched 1 cent up to $75.24 a barrel, after earlier touching a four-year high of $75.91. [O/R]

Some analysts say fears about the supply of oil may be overdone.

"Even assuming that Iranian output will fall by as much as it did during the far more comprehensive sanctions imposed between 2011 and 2014...we think that likely increases elsewhere will be enough to make up the difference," Capital Economics said in a note. - Reuters

Earlier report:

Asian stocks kick off mixed; dollar holds gains

SYDNEY: Asian stocks began the day mixed Wednesday following a volatile U.S. session as investors weighed continuing concerns in Indonesia and Italy and strength in commodity prices. The dollar and Treasuries held on to modest gains.

Japanese shares edged lower, while equities in Australia ticked higher. Shares in Hong Kong are seen recovering from the biggest one-day slide in a month, with the local dollar trading at the weak end of its band with the greenback. Indonesian assets remain in focus as rising oil prices add to souring sentiment that’s driven the rupiah down past 15,000 per dollar for the first time in 20 years. Crude oil futures steadied in New York around the highest level in almost four years.

In the U.S., retailers slipped after Amazon.com raised the minimum wage for all its employees, with the S&P 500 Index edging lower. European shares slid as concern mounted that Italy’s budget confrontation with the EU raised the risk of a debt crisis. 

The yield on 10-year Italian government bonds touched the highest level in more than four years and the euro traded at the lowest in six weeks after Claudio Borghi, head of the lower house budget committee, said the euro was “not sufficient” to solve Italy’s fiscal issues.

Investors remain on edge this week with the market impact of European politics and emerging market strains still high on the agenda. A close call between a U.S. and a Chinese warship in the disputed South China Sea in recent days added to tensions between two countries already embroiled in an escalating trade war. 

Meanwhile, Treasury yields held near the top of the recent range as Federal Reserve Chairman Jerome Powell welcomed increases in Americans’ wages while expressing confidence that low unemployment won’t spur a takeoff in prices that would force him to hike interest rates more aggressively.

Elsewhere, the pound traded near three-week lows after Boris Johnson won cheers at the U.K. Conservative Party’s annual conference with an attack on Theresa May’s Brexit plan, but stopped short of calling for her to be removed as prime minister. 

In India, focus is back on the country’s financial sector after Prime Minister Narendra Modi’s government took control of Infrastructure Leasing & Financial Services Ltd., promising to end the group’s string of defaults. - Bloomberg

Earlier report: