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[TOKYO] Asian stocks climbed, led by the the biggest gain in 10 months for Japanese shares, while emerging-market and commodity-producer currencies strengthened amid optimism China will be able to stabilise its financial markets.
The Topix index climbed by more than 4 per cent, while a gauge of Chinese shares in Hong Kong headed for its first back- to-back in a month after Tuesday's late-afternoon recovery in Shanghai set off a global equity rally. Australia's dollar rose a third day, while Malaysia's ringgit rebounded off a 17-year low. The yen traded near its weakest level this week and bonds from Japan to New Zealand fell as demand for haven assets abated.
Chinese stocks opened higher Wednesday after capping their first gain in five trading days. While Tuesday's rebound was likely engineered by regulators, investors took it as a sign that authorities can calm volatile markets and limit damage to the slowing economy. The Federal Reserve remains in focus ahead of next week's meeting, with odds on a rate hike being pushed out to December given the recent gyrations in financial markets and last Friday's mixed jobs data.
"As long as China is stable and equity markets there aren't in free fall, markets will generally go higher," Chris Weston, chief markets strategist in Melbourne at IG Ltd, said by phone. However, "we won't rule out more volatility ahead of the US meeting next week," he said, referring to the Fed's gathering Sept. 16-17.
Stocks The MSCI Asia Pacific Index jumped 2.8 per cent by 11:05 am in Tokyo. Japan's Topix climbed 4.1 per cent, the most since Oct 31, as the yen slipped for a third day. All of the 1,887-member Topix's 33 industry groups climbed. The country's equity markets closed lower Tuesday, with the Nikkei 225 Stock Average erasing its 2015 gain just before Shanghai rallied. The yen, which typically moves at odds with Japan's equities, slipped 0.3 percent to 120.22 per dollar Wednesday.
Standard & Poor's 500 Index futures rose 0.5 per cent following the gauge's second-biggest one-day jump of 2015. The S&P 500 rallied 2.5 per cent Tuesday, erasing Friday's retreat. The Dow Jones Industrial Average gained 390 points, its steepest increase since Aug 26.
The Hang Seng China Enterprises Index jumped 3.1 per cent, extending its 4.1 per cent surge Tuesday. The measure of Chinese companies listed in Hong Kong is heading for its biggest two-day advance since April.
The Shanghai Composite Index rose 0.9 per cent after its 2.9 per cent Tuesday advance. The biggest US exchange-traded fund tracking mainland Chinese stocks surged the most in two months in New York after the 2.9 per cent rebound in the Shanghai Composite.
China's efforts to curb volatility in its stock market have suppressed index futures trading, with volumes on contracts tracking the CSI 300 and CSI 300 Index sliding to a record low Tuesday, down 99 per cent from their June highs. What was once the most active market for index futures as recently as July, according to the World Federation of Exchanges, has all but dried up after regulators raised margin requirements and tightened position limits.
Australia's S&P/ASX 200 Index rose 1.2 per cent, led by financial stocks and telephone shares. The Kospi index in Seoul snapped a three-day drop to climb 2 per cent, the most since Aug 26.
The Aussie climbed a third day, rising to 70.60 US cents, set for its highest close this month. Neighbouring New Zealand's dollar also extended gains, strengthening 0.8 per cent before the central bank reviews interest rates on Thursday. South Africa's rand advanced 1.2 per cent, set for its biggest two-day gain in almost six months.
The ringgit added 0.8 per cent to 4.3055 per dollar, while the South Korean won advanced 0.8 per cent in a second day of gains. The Thai baht was up 0.6 per cent. A Bloomberg gauge of developing-nation currencies climbed a second day, rising 0.1 per cent following Tuesday's 0.7 per cent surge.
The resurgence in demand for risk assets quelled demand for government bonds, with yields on Japan's 10-year notes up two basis points, or 0.02 percentage point, to 0.37 per cent. Rates on Australian debt due in a decade were up six basis points to 2.73 per cent, while Treasuries maintained declines.