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Asia: Stocks mostly up but traders stay cautious

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[HONG KONG] Asian markets mostly rose Thursday morning as upbeat US data provided some cheer after two days of sharp losses fuelled by Britain's EU exit, although fear of risk lifted the safe-haven yen.

The pound managed to hold up against the US dollar, having recovered marginally from hitting a 31-year low Wednesday although uncertainty over Britain's future is keeping downside pressure on the unit.

Regional markets went into freefall over the previous two days after the head of the Bank of England said the risks of leaving the EU were "crystalising" while commercial property funds prevented clients from withdrawing cash to prevent a run.

Traders took the opportunity to pick up some bargains after the sell-off, helped by gains on Wall Street where a strong reading on the US services sector provided some much-needed cheer.

Hong Kong rose one per cent, Sydney added 0.5 per cent and Seoul also gained one per cent, while there were also advances in Singapore, Taipei and Wellington. However, Tokyo was down 0.2 per cent by the break while Shanghai dipped 0.1 per cent.

The Institute for Supply Management said its purchasing managers index for the non-manufacturing sector rose much more sharply than expected in June and at its fastest pace in seven months.

With the services sector accounting for almost three quarters of the US economy, the news indicates a recovery is getting back on track.

The report will come as a shot in the arm for investors convulsed by the shock June 23 decision by Britain to leave the EU after four decades, fanning a wave of uncertainty.

"We are once again seeing a situation where the US economy is seemingly looking OK, while the UK and Europe are showing increasing signs of fragility," said Chris Weston, chief market strategist at IG Ltd in Melbourne, according to Bloomberg News.

Europe's financial sector is already under pressure after the European Central Bank warned Italy's number-three lender and the world's oldest bank it had dangerously high levels of bad debt.

But while a sliver of positivity has returned to equities, currency traders continue to look for safe havens such as the yen, while the pound remains fragile.

The pound was at US$1.2932, having sunk to US$1.2798 at one point Wednesday, its lowest level since June 1985.

The US dollar slipped to 100.80 yen from 101.31 yen, with minutes from the Federal Reserve's latest policy meeting showing the rate-setting board - which met before the Brexit vote - split on whether the US can handle hike in borrowing costs this year.

The Australian dollar tumbled to 74.67 US cents from 75.14 cents after Standard & Poor's said it had cut its outlook on the country's AAA credit rating after the weekend's general election left no clear winner and the prospect of a hung parliament.