Renewed wave of risk appetite lifts Asia

Strong gains noted in the major indices after cautious outing yesterday

Asian markets ended on a broadly buoyant note, with a renewed wave of risk appetite bringing in a spate of massive gains for the major indices. The markets were seemingly back on track after a cautious session as evidence that the export led economies are on the road to recovery spurred the sentiments. China, India, Hong Kong and Japan ended with smart upside nudges on expectation that worst is over for the US economy and the worldwide recession may be getting over soon.

Yesterday, the US Stocks
finished on a mixed note after seeing choppy trading, with reaction to the latest earnings results limited by low volume. Meanwhile, Federal Reserve Chairman Ben Bernanke redelivered his address regarding monetary policy before the Senate Banking Committee while also fielding questions regarding the current and near-term economic outlook. In his prepared remarks, Bernanke reiterated that the U.S. economy is showing signs of stabilization, although he noted that the economy is still in a fragile state, with unemployment high and consumer spending shaky.

However, Bernanke conceded that unemployment is "the most pressing issue" facing the Fed, but he noted that there are steps that Congress could take to ease the situation, similar to the already-passed extension of unemployment benefits.

With US markets not providing much of a direction, the response from Asian bourses was surprisingly upbeat. Japan's exports fell in June at the slowest pace this year and orders for Taiwanese shipments declined the least in eight months, adding to evidence that Asia's economies are on the road to recovery.

Japanese overseas sales dropped 35.7 percent from a year earlier, easing from a 40.9 percent decline in May, the Finance Ministry said in Tokyo. Orders for Taiwan exports, an indication of shipments in one to three months, fell 10.91 percent from a year earlier, easing from a 20.14 percent retreat in the previous month, the Ministry of Economic Affairs said in Taipei.

The Nikkei 225 Stock Average rose 0.70% at the close in Tokyo, taking its gains to 39 percent since reaching a 26- year low on March 10. The yen weakened to 94.30 per dollar from 93.59, spurring a renewed wave of risk appetite. In other major gainers, Chinese stocks continued to consolidate at 13-month highs, ending up around 1%. However, the biggest gainers were India and Hong Kong, with the benchmark stock indices in these countries jumping by nearly 3% each.

Looking ahead, the market participants are expecting yet another volatile session on the US exchanges. Traders will react to earnings from Qualcomm, McDonald's, Wyeth and AT&T Thursday morning while also looking to two key economic reports.

The U.S. Labor Department will release its weekly jobless claims report, with economists expecting first time claims for the week ended July 18th. Housing will also be in focus, with the National Association of Realtors scheduled to report figures on existing home sales for June shortly after the opening bell on Wall Street.