GLOBAL MARKETS-Stocks, euro up on upbeat data, firm Spanish auction

Larger Smaller Reset TOKYO (Dec 21): Asian stocks and the euro rose on
Wednesday after upbeat U.S. and German data and strong demand for
Spanish debt, with investors' focus turning to a European Central Bank's
tender as a gauge for euro zone funding strains.

MSCI's
broadest index of Asia Pacific shares outside Japan rose 1.1 percent,
recovering about half of its losses posted on Monday after news of the
death of North Korean leader Kim Jong-il raised fears of regional
instability and triggered a broad sell-off in riskier assets.

The Nikkei stock average opened up 1.3 percent, following a rally in global and U.S. stocks on Tuesday.

Global stocks climbed 2.3 percent for their strongest gains in three
weeks on firm German business sentiment and signs of a recovery in the
U.S. housing market.

Wall Street stocks jumped nearly 3 percent,
led by banks, after the Federal Reserve's new capital proposals turned
out to be less worrying than feared.

Strong demand for 3- and
6-month Spanish Treasury bills pushed the yields sharply down from a
month ago, helping to ease fears that the borrowing costs for
highly-indebted countries would remain extremely high as concerns
persist over slow progress in resolving the euro zone debt crisis.

Further adding to positive sentiment were expectations for the ECB's
first ever three-year tender to be conducted later on Wednesday, aimed
at easing the interbank lending strains.

"A significant uptake
is all but guaranteed and that's something that could continue this
'risk-on' (mood)", said Robert Rennie, chief currency strategist at
Westpac in Sydney.

The euro inched up 0.2 percent to $1.3110 on
Wednesday. The single currency rose 0.6 percent on Tuesday for its best
day since Nov. 30, reaching a one-week high of $1.3132 and moving away
from an 11-month low of $1.2944 hit last week.

Sources reported
more than 10 Italian banks, including major lenders, were looking to
apply for the ECB loans by using state-guaranteed bonds as collateral.

But Rennie warned: "That optimism will quickly fizzle out as the ECB is still a long way from embracing quantitative easing."

Analysts say the long-term ECB loans will lower the cost for euro zone
banks to borrow euros in the open market, but won't reduce their dollar
funding costs.

The benchmark London interbank offered rate for
three-month dollars rose on Tuesday to 0.56975 percent, the highest
level since July 2009.

Hopes banks will use the borrowed money
from the ECB to purchase high-yielding debt lowered 10-year Italian and
Spanish government bond yields to 6.632 percent and 5.127 percent
respectively, further away from above 7 percent level widely seen as
unsustainable.

But it was more likely that the banks would use
the funds to repay their own debts as they strive to get rid of bad
assets and improve their balance sheets amid strong regulatory pressures
to beef up their core capital.

Industrial metals such as oil
and copper rose on Tuesday on supportive economic data, while gold rose
to a one-week high on the back of the euro's 1 percent rise against the
dollar.

Oil prices posted their biggest percentage rise since October on Tuesday and copper reached near a one-week high.

European Union leaders will meet on Jan. 30 to try to make further
progress towards the region's fiscal consolidation, as agreed at a
summit meeting earlier this month. The leaders will negotiate the
intergovernmental agreement to tighten fiscal controls and sanctions in
the euro zone.

Fading risk aversion helped improve sentiment in
Asian credit markets, with spreads on the iTraxx Asia ex-Japan
investment grade index narrowing by 4 basis points on Wednesday. -
Reuters