GLOBAL MARKETS-'Fiscal cliff' hopes lift Asian shares, other risk assets

Chikako Mogi
Reuters Middle East

* MSCI Asia ex-Japan up 0.2 pct, Nikkei at 8-1/2-mth peak

* Yen stays pressured ahead of this week's BOJ meeting

* Fresh offers raise hopes US can deal with fiscal woes

* Oil, copper, gold rise on improving sentiment

* European shares likely to climb

TOKYO, Dec 18 (Reuters) - Asian shares and other risk assets

rose on Tuesday as signs of compromise sparked new optimism that

the U.S. "fiscal cliff" budget tussle could be settled before

tax hikes and spending cuts begin to bite early next year.

Differences over how to resolve the fiscal cliff narrowed

significantly Monday night as President Barack Obama made a

counter-offer to Republicans that included a major change in

position on tax hikes for the wealthy, according to a source

familiar with the talks.

The move, which the source stressed was not Obama's final

offer, was welcomed by a spokesman for Republican House of

Representatives Speaker John Boehner, potentially advancing

negotiations towards a deal by the end-year deadline.

Oil, copper and gold also firmed on the prospect of progress

in the U.S. budget talks, which reduced worries about economic

damage, but expectations of more monetary easing in Japan kept

the yen soft.

"The market will view any advance in talks as positive for

confidence, which has been battered by the daily flow of

political fighting," Ben Taylor, sales trader at CMC Markets

said in a report.

"Regardless of what is decided, the market is looking for a

decision and any compromise will help provide a clearer picture

for the future."

European shares were expected to keep up the positive

momentum, with financial spreadbetters predicting London's FTSE

100, Paris's CAC-40 and Frankfurt's DAX

will open as much as 0.5 percent higher. A 0.3 percent gain in

U.S. stock futures suggested a higher Wall Street


MSCI's broadest index of Asia-Pacific shares outside Japan

was up 0.2 percent, following a rise in global

shares on Monday. The index snapped an eight-day winning streak

on Monday as investors took profits from last week's rally.

Regional equities also took direction from local factors.

Australian shares gained 0.5 percent to a 17-month

high, with resource stocks elevated by a rise in iron ore prices to a five-month high.

"Iron ore is a very key commodity in the Chinese industrial

machine, steel usage will bounce back and that is good news for

our exporters," said Baillieu Holst director Richard Morrow.

Seoul shares rose marginally but underperformed some

others in Asia, as investors were reluctant to build positions

ahead of South Korea's presidential vote on Wednesday.

London copper was up 0.3 percent to $8,085 a tonne.

"Before the end of the year, I don't really see huge selling

pressure, with improving data from China and expectations for a

resolution to the fiscal cliff," said analyst Bonnie Liu of


U.S. crude surged 0.8 percent to $87.85 a barrel and

Brent rose 0.7 percent to $108.41.

Spot gold added 0.3 percent to $1,702.01 an ounce.

Solid performance in stocks boosted Asian credit markets,

narrowing the spreads on the iTraxx Asia ex-Japan

investment-grade index by two basis points.


In Japan, the Nikkei average closed up 1.0 percent

at an 8-1/2-month high and edged closer to the key 10,000-mark,

with sentiment bolstered by a landslide election win for the

conservative Liberal Democratic Party on Sunday.

LDP leader Shinzo Abe, due to be confirmed as Japan's

premier on Dec. 26, is calling for far more aggressive monetary

stimulus and huge public works spending to rescue Japan from

decades-long deflation. His pledges are seen as pressuring the

yen and supporting Japanese stocks by improving earnings for the

country's exporters.

"The Nikkei is up today primarily due to the rise in U.S.

stocks overnight, but the 'Abe-effect' is surprisingly

longer-lasting as investors seem to be postponing the timing of

unwinding their positions until they see the details and

specifics in policies," said Ayako Sera, market economist at

Sumitomo Mitsui Trust Bank.

The dollar inched up 0.1 percent to 83.96 yen, off a

20-month high of 84.48 yen hit on Monday but well above its late

New York levels on Friday.

Abe applied fresh pressure on the Bank of Japan on Monday,

saying that the election result reflected strong public support

for his views, which he hoped the BOJ would take into account at

its two-day policy meeting starting on Wednesday.

"The dollar has more upside against the yen ahead of the

BOJ's meeting, with expectations for some additional easing

steps being strengthened after Abe's comments yesterday," said

Yuji Saito, director of foreign exchange at Credit Agricole in


"The corrective fall in the dollar/yen after the election

was small and it's crawling up because the yen weakening trend

is still intact. But after the BOJ meeting, there will likely be

pre-holiday profit-taking, pushing the dollar/yen down by 1 to 2

yen," Saito said, adding that the dollar could temporarily touch

85 yen before profit-taking sets in by year-end.

Concerns that big-scale fiscal stimulus could seriously

increase the country's debt burden pushed the benchmark 10-year

Japanese government bond yield to a one-month

high of 0.750 percent.

U.S. Treasury yields also inched up in Asia, with the

10-year yields briefly reaching 1.796 percent, its

highest level since Oct. 26, on hopes for a deal on the U.S.

fiscal cliff. [US/T

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