Asia: Stocks rise with US futures, euro on Greece; yen weakens

[WELLINGTON] Asian stocks rose with US index futures and the euro amid optimism Greece will forge a deal to avert its expulsion from the currency bloc and on bets China's equity rout will be contained. The yen retreated with Treasuries.

The MSCI Asia Pacific Index added 0.2 per cent by 10 am in Tokyo. The gains trimmed the gauge's worst weekly drop since May 2012 to 3.8 per cent. Standard & Poor's 500 Index futures gained 0.7 per cent. The euro rallied 0.3 per cent to US$1.1074, while the yen also lost 0.3 per cent. Ten-year Treasury yields advanced another two basis points, with Australian and Japanese bonds falling a second day. US crude oil held onto gains.

Greece submitted a reform package similar to that mooted by creditors last month as the indebted nation seeks to remain in the euro and salvage its tattered economy. The proposal, which includes pension savings and tax increases, will be discussed at a European Union summit on Sunday. The biggest US-listed exchange-traded fund tracking Chinese shares surged 20 per cent in New York Thursday, after local stocks rebounded.

"Signs that the proposal Greece has put together has concessions on long-standing issues and is similar to tabled proposals is reducing risk aversion," Sam Tuck, a senior currency strategist in Auckland at ANZ Bank New Zealand, said by instant message. "The fact that China managed to close up across the board has certainly reduced market fear, but it's still very much in the forefront of people's minds." Greece's proposed reforms were similar to those presented by the European Commission on June 26. They include creditors' longstanding demands for sales tax increases and cuts in public spending on pensions. Greece also proposed the restructuring of its debt and a package of growth measures of 35 billion euros. The proposal will be put before the Greek Parliament on Friday.

Asian Moves Japan's Topix index climbed 0.2 per cent after a two-day loss of more than 3 per cent. The Nikkei 225 Stock Average retreated 0.5 per cent as Fast Retailing Co, its biggest stock, fell after forecasting slower local sales. The yen, which typically moves at odds with Japanese equities, dropped to 121.73 per dollar, cutting its gain in the week to 0.9 percent.

The Kospi index added 0.2 per cent in Seoul, while Australia's S&P/ASX 200 Index increased 0.6 per cent amid a rebound in energy and mining shares. Chinese prices for iron ore, the country's biggest export, spiked up 9.9 per cent Thursday, after sliding 10 per cent the day before to the lowest level since at least 2009. China is also one of Australia's main trading partners.

Fidelity Investments, overseer of the largest China funds outside the mainland, joined Goldman Sachs Group Inc. in its bullish call on Chinese stocks, calling shares there a buy despite the steepest selloff in 20 years. Fundamentals back a rebound and "we are actually quite confident," Robert Bao, a Hong Kong-based money manager at Fidelity, which oversees more than US$2 trillion globally, said in an interview.

The Deutsche X-trackers Harvest CSI 300 China A-shares ETF climbed for the first time since June 30 on Thursday, rallying the most on record in New York after a bounce back in Shanghai and Hong Kong shares. Stock futures were more mixed in recent trading, with contracts on China's CSI 300 Index up 10 per cent, while futures on the FTSE China A50 Index, a gauge of the biggest mainland-traded companies, were little changed.

Hang Seng China Enterprises Index futures added 4.3 per cent before after-hours trading was halted Thursday because of a tropical storm. Taiwanese markets are closed Friday as Typhoon Chan-hom approaches the island.

The Chinese rout, sparked by margin investors unwinding trades amid concern over a bubble, took a breather Thursday after regulators banned major shareholders from selling stakes and with more than 50 per cent of listed companies suspended from trading. The magnitude of price swings on the Shanghai Composite was at the highest since at least 2008, with investors including Templeton Emerging Markets' Mark Mobius calling the latest support measures a sign of "desperation." "China has managed to stop its decline for now using all sorts of government tools," Yutaka Miura, a technical analyst at Mizuho Securities Co in Tokyo, said by phone. "But once trading resumes in shares that had stopped trading, we'll see more selling. They've stopped falling for now and had an autonomous rebound but I expect a volatile state to continue for some time." The Philippines reports on exports Friday and Australia updates data on home loans. Malaysian industrial production is also due.

Yields on Australian government debt due in a decade added 10 basis points, or 0.10 percentage point, to 2.90 per cent. Similar maturity Japanese bonds yielded 0.45 per cent, up one basis point, while New Zealand notes halted a six-day advance.

A wave of risk aversion hit financial markets earlier in the week as lingering concerns over Greece met mounting anxiety about China's stock selloff, sending yields on 10-year Treasuries down to their lowest level since the start of June.

The International Monetary Fund on Thursday cut its forecast for global growth this year, citing a weaker first quarter in the US The lender did, however, express confidence that financial-market turbulence from China to Greece won't cause widespread damage.

Minutes of the Federal Reserve's June meeting, published on Wednesday, indicated officials thought tighter monetary policy was warranted, despite concern over risk from abroad. Investors will get further clues on the Fed's outlook when chair Janet Yellen speaks on Friday.

West Texas Intermediate crude oil was little changed at US$52.87 a barrel on Friday after halting a five-day drop in the previous session. WTI is down 7.1 per cent this week, set for a second straight weekly retreat amid resurgent concern over a global glut in the commodity.

BLOOMBERG