SINGAPORE (Reuters) - Asian shares jumped on Tuesday after JPMorgan raised its bid for Bear Stearns BSC.N and U.S. home sales rose unexpectedly, boosting expectations for a recovery in the U.S. credit and housing markets.
Financial spreadbetters expected stock indexes in London .FTSE, Paris .FCHI and Frankfurt .GDAXI to open between 1.7 and 2.6 percent higher as investors returned from a four-day break cheered by the news from the United States.
Japanese government bond futures retreated, pulling away from last week’s five-year highs, after U.S. Treasuries slid on tentative expectations the world’s top economy would weather the credit crisis. The dollar gave up earlier gains to trade lower versus the yen.
Financial stocks, from Singapore’s United Overseas Bank (UOBH.SI) to Australia’s Babcock & Brown BNB.AX, notched up big gains as JP Morgan Chase’s (JPM.N) five-fold increased offer for Bear Stearns suggested there was more value in the battered sector than previously thought.
“If there’s even a hint that the U.S. housing slump might be coming to an end, and combined with an improved offer for Bear Stearns, it gives people hope that maybe the darkest period is over,” said Hans Kunnen, head of investment markets research at Colonial First State in Sydney.
“But the market is just operating like a yo-yo within a band. I refuse to get carried away.”
MSCI’s index of Asia shares outside of Japan .MSCIAPJ added 3.5 percent by 6:00 a.m. (British time), its biggest daily gain since late January and up for the third straight session. The benchmark is however still down 15 percent this year.
Stronger-than-expected U.S. housing data also helped to lift optimism over the economic outlook.
Japan's Nikkei index .N225 closed up 2.1 percent as Canon Inc (7751.T) and other exporters climbed as the yen traded well below a near 13-year high hit last week against the dollar, easing some concern about the outlook for earnings.
The Vietnam index .VNI however fell 4.7 percent, down for the eighth day in a row as recent plans by the government to buy stocks failed to boost investor confidence dented by surging inflation and tighter monetary policy.
June 10-year JGB futures fell as much as 0.50 point to 140.15, moving further away from a five-year high of 142.00 hit last week as stock gains grew.
In the currency markets, the dollar fell back towards the psychologically key 100 yen mark, giving up earlier gains made after better-than-expected U.S. housing data had revived some optimism towards the U.S. economy.
The dollar had rallied broadly on Monday also on news that JPMorgan had raised its offer for Bear Stearns, which boosted investor appetite for risk.
“The big question now is whether the dollar’s recovery was only a position adjustment before the holidays or something more that could rattle the global markets later on,” said Haruhisa Takagi, head of the forex trading group at Sumitomo Mitsui Bank.
The dollar had plunged to as low as 95.77 yen last week, its lowest since 1995, amid the Federal Reserve’s aggressive efforts to ease the credit crisis.
Oil fell for a fourth day in a row, dipping briefly below the $100 mark, extending a 10 percent fall from last week’s record, damaged by a buildup in U.S. crude stocks and concerns over slower energy demand.
U.S. light crude for May delivery was down 52 cents at $100.34 a barrel.
“There is a realisation in the market that the fundamentals really don’t justify prices to be so far above $100. One of the key factors is the recent buildup in U.S. stockpiles and the stocks are looking pretty healthy at this stage,” said Gerard Burg, a resource analyst at the National Australia Bank.
Gold rebounded to $924.60/925.4 an ounce, but was within sight of last week’s one-month low of $904.65 an ounce.