Chinese and Hong Kong stocks rebounded after Beijing's announced inflation-cooling measures proved less harsh than expected, while Japanese stocks ended at a four-month high as the yen's decline against the euro spurred buying interest.
Tokyo's Nikkei Stock Average rose 2.1% to 10,013.63, its first finish above 10,000 since June. Also closing higher: the Shanghai Composite Index, up 0.9%; Hong Kong's Hang Seng Index, up 1.8%; Sydney's S&P/ASX 200, up 0.3% in Sydney; Seoul's Kospi, up 1.6%. Thailand's SET was up 0.7% in afternoon trading.
On mainland bourses as well as in Hong Kong, stocks recovered from a string of recent losses after the State Council Wednesday said it will initiate a series of measures to stabilize commodity and energy prices, mainly through administrative control.
Li Xin, analyst at China Development Bank Securities said, "Concerns over more stringent tightening policies (have) eased a bit, as the measures the State Council is planning to take will have limited material effect."
Automobile and resource-linked stocks led the gains, recovering some lost ground. SAIC Motor Corp. rose 4.9% and Aluminum Corp. of China, or Chalco, rose 2.1% in Shanghai, while FAW Car rose 3% and Yunnan Copper gained 2.6% in Shenzhen. In Hong Kong, shares of Jiangxi Copper jumped 5.3% and Dongfeng Motor Group. surged 9.3%.
"The correction since Nov. 8 has factored in more severe tightening measures, such as interest-rate hikes, price controls and a lower loan-growth target.… Looking forward, we believe the market could still focus on the topic of inflation and controlling inflation could become a more difficult task for the government," UBS Investment Research strategist John Tang wrote in a note to clients.
Dow Jones Industrial Average futures jumped 77 points in screen trade, pointing to a higher opening on Wall Street.
The Tokyo market came to life in late morning, partly as the yen's fall against the euro triggered futures buying. Traders also said a broader improvement in sentiment spurred sharp rises in banking shares. Mizuho Financial Group gained 3.9%, Nomura Holdings 4.7% and Sumitomo Mitsui Financial Group 3.4%.
"A huge amount of funds can move as foreign investors, who had been pessimistic on Japanese stocks, shift their stance from underweight to neutral," said Tsuyoshi Segawa, equity strategist at Mizuho Securities.
Mitsubishi Electric advanced 4% after a Nikkei report said the company aims by early fiscal 2013 to lift its consolidated sales to 4 trillion yen ($48 billion), more than 10% higher than its forecast for the current fiscal year.
In Sydney, the market was a tad higher after Wednesday's drop although demand was scarce as investors awaited an update on the Irish debt situation. In Sydney, Atlas Iron rose 4.4% after news it had started discussions with BHP Billiton about co-operating on iron-ore haulage and port access in Australia's Pilbara region. BHP shares added 0.8%.
In Seoul, Hyundai Engineering & Construction rose 1%; it had lost more than 18% in the previous three sessions, after Hyundai Group was selected as the preferred bidder for a controlling stake in the builder. The selling was fueled by concerns that Hyundai Group will have to resort to heavy borrowing to fund the acquisition.
GS Engineering & Construction rose 1.9% after winning a $2.9 billion order for a fertilizer plant in Australia. SK Telecom Co. fell 1.5% after confirming that it has been notified of a probe into the company by the National Tax Service.
Among other markets, New Zealand's NZX 50 fell 0.3% and Philippine stocks ended 1.3% higher. In afternoon trading, India's Sensex was off less than 0.1%, while both Singapore's Straits Times Index and Indonesian shares were iff 0.1% as trading resumed in those markets after a public holiday Wednesday, when most Asian markets declined.
In foreign-exchange markets, the euro got some respite after U.S. inflation data bolstered the case for the Fed to keep supporting the U.S. economy. Indications that some resolution might be in sight for Ireland's debt troubles also lifted the single currency.
The euro was fetching $1.3594 from $1.3520 late Wednesday, and 113.19 yen from 112.59 yen. The dollar was buying 83.31 yen, compared with 83.28 yen.
"All eyes will remain on Europe and whether or not any concrete proposals for Ireland will emerge from the (European Union) finance minister's meeting currently underway," said Mike Jones, currency strategist at the Bank of New Zealand. He said that in the event Ireland accepts the EU/International Monetary Fund aid, it would support risk-appetite and growth-sensitive currencies like the Australian dollar and the euro.
Lead December Japanese government bond futures were down 0.51 at 141.45 points on Wednesday's weakness in U.S. Treasurys and the rebound in Tokyo stocks. Ten-year cash bond yields were up 0.045 percentage point at 1.100%.
Spot gold was at $1,355.70 per troy ounce, up $19.90 from the New York close on Wednesday. December Nymex crude-oil futures climbed $1.09 to $81.53 per barrel on Globex.