GLOBAL MARKETS-Asian shares rise on hopes for US fiscal deal

Chikako Mogi
Reuters Middle East20 November 2012

* MSCI Asia ex-Japan up 0.7 pct, Nikkei eases from 2-month


* Euro slips after Moody's scraps France's top-notch rating

* Markets prone to profit taking ahead of U.S. long weekend

* BOJ stands pat, RBA keeps rate cut option in Nov. 6


* European shares likely lower

TOKYO, Nov 20 (Reuters) - Asian shares rose on Tuesday on

hopes of a compromise in the U.S. fiscal crisis, while the euro

fell after Moody's Investors Service scrapped France's top-notch

credit rating, reminding investors of the downside risk from the

euro zone debt woes.

With risk assets from stocks to commodities rallying over

the past two sessions, recovering some of last week's sharp

losses, markets were prone to profit taking as trading will

likely slow ahead of Thanksgiving holiday weekend.

The dollar steadied against a basket of key currencies

after Monday's 0.5 percent drop, capping commodities and

gold. Oil also retreated from a near 3 percent jump on Monday.

U.S. stock futures eased 0.1 percent to hint at a

weak Wall Street open. Financial spreadbetters predict London's

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

will open down as much as 0.3 percent.

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

added 0.7 percent, led by the materials and

technology sectors .

Wall street climbed nearly 2 percent on Monday thanks to

expectations that U.S. Congress reach a compromise to avoid $600

billion in tax increases and spending cuts due to start in

January - the "fiscal cliff" that threatens to derail the U.S.


"There's some optimism at the moment about the Americans

doing something constructive about their fiscal cliff problem,"

said Damien Boey, equity strategist at Credit Suisse.

Tech stocks lifted Korean shares up 0.6 percent and

Hong Kong stocks added 0.8 percent to a one-week high.

Shanghai shares fell 0.5 percent, nearing their

lowest since early 2009 hit on Monday, after data showed China's

foreign direct investment inflows fell 3.45 percent in the first

10 months of 2012 from a year ago.

Japan's Nikkei average inched down 0.1 percent,

after reaching a fresh two-month high earlier in the day.

As expected, the Bank of Japan took no fresh steps after a

two-day policy meeting on Tuesday, reiterating that it would

pursue powerful monetary easing as Japan's economy is weakening.

The dollar fell 0.2 percent to 81.23 yen, but held

near its highest since April 25 of 81.59 yen touched on Monday.

David Baran, co-founder of Tokyo-based hedge fund Symphony

Financial Partners, said Japanese equities and the yen were

attractive in comparison to other Asian assets. Nikkei has

stayed at the lower end of ranges through 2012 and there are

expectations that next month's election will result in a

government that wants the BOJ to take stronger stimulus steps.

"Just from a risk-reward standpoint, you are seeing

investors looking at Japan, looking at the yen and natural

extrapolation of maybe we've seen the end of the bottom range of

the dollar/yen," he said. "If you are trying to trade big moves,

turning points, then you are getting into low risk, high reward

possibility in yen and subsequently Japanese equities."


Euro zone finance ministers are expected to give a tentative

go-ahead for the disbursement of 44 billion euros in emergency

loans to Greece at a meeting later on Tuesday and discuss how to

reduce Greek debt and provide two extra years of external

financing to help Athens meet its fiscal target.

Ratings agency Fitch on Monday warned that failure to reach

a deal on the "fiscal cliff" could trigger a recession and push

the U.S. jobless rate above 10 percent. Given such "far-reaching

effects," Fitch said it did not expect Congress to allow it to

happen, echoing recent market optimism.

But Richard Franulovich, senior currency strategist at

Westpac Securities in New York, said in a note that the positive

conciliatory rhetoric over the "fiscal cliff" could easily come

unstuck, while anything that is produced at the euro zone

finance ministers' meeting is likely to be piecemeal.

"Given our read of the fiscal cliff and Greek risks we

remain comfortable fading strength in risk assets," he said.

The euro zone's debt crisis saw Moody's cut France's

government bond rating to Aa1 and keep its negative outlook,

citing the country's uncertain fiscal outlook and deteriorating

economic prospects.

France's downgrade sent the euro down 0.3 percent to

$1.2777 from $1.2810, before it steadied to $1.2797, and also

weighed on the euro against the yen.

Hiroshi Maeba, head of FX trading Japan for UBS in Tokyo,

said the reaction to the downgrade was limited, as trading was

getting lighter ahead of Thanksgiving weekend.

"Given the recent market rally, the rest of the week is

likely to be spent on adjusting positions before the long

weekend, with any uptick giving way to profit taking," he said.

Brent crude held steady above $111 a barrel on

Tuesday, less than a dollar away from a one-month top hit in the

previous session, on hopes over the U.S. budget crisis and

supply worries triggered by tensions in the Middle East.

U.S. crude futures eased 0.3 percent to $89.06.

Spot gold was nearly flat at $1,732.05 an ounce.

With risk appetite recovering, credit market spreads on the

iTraxx Asia ex-Japan investment-grade index

tightened by 4 basis points.

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