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 There was some relief when China's benchmark short-term money rate
opened sharply lower at 5.57 percent, which was enough to help
Shanghai edge up 0.15 percent <.SSEC>.
Volumes were very light with Tokyo on holiday on Monday and
Christmas almost here. Australia's main index <.AXJO> added 0.2
percent while S&P 500 futures gained 0.33 percent.
MSCI's broadest index of Asia-Pacific shares outside Japan
<.MIAPJ0000PUS> firmed 0.5 percent.
Sentiment was underpinned by upbeat data on U.S. economic growth and
the resilience of stocks to the Federal Reserve's decision to start
scaling back its bond-buying stimulus.
On Wall Street, the Dow Jones <.DJI> ended Friday up 0.26 percent,
while the S&P 500 Index <.SPX> added 0.48 percent. Europe's broad
FTSEurofirst 300 index <.FTEU3> rose 0.45 percent.
The dollar was idling at 104.02 yen on Monday after scoring a fresh
5-year high at 104.64 last week. Dealers cited option barriers at
104.75 and 105.00 as the next target for bulls.
The euro was a shade firmer at $1.3681, but well short of last
week's $1.3811 peak.
The single currency was only briefly troubled on Friday when
Standard & Poor's cut its supranational long-term rating on the
European Union to AA-plus from AAA, citing rising tensions on budget
negotiations.
Yields on benchmark 10-year Treasuries were holding at 2.89 percent
having risen just 2 basis points last week even as the Fed announced
its tapering.
In Asia, all eyes were on China after the country's central bank
sought to allay fears of a cash crunch on Friday, saying it has
added $50 billion in three days to the interbank market.
Rapid credit growth in the world's second-biggest economy has
worried the Chinese authorities, who fear rising debt levels are
fuelling asset bubbles.
The People's Bank of China (PBOC) injected more than 300 billion
yuan into the interbank market in response to rising rates, but
hinted that banks have work to do if they want to avoid a cash
crunch.
Worries about the banking system contributed to a 2 percent drop in
Shanghai shares on Friday.
The combination of Fed tapering and tighter China interest rates
could weigh on emerging market currencies and assets, as it did back
in June.
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Currencies from Indonesia to Malaysia and Thailand all came under
pressure last week and even the Korean won lost a little of its
strength.
Still, analysts at Deutsche argued that emerging markets (EM) Asia
could weather any outflow of capital.
"Asia remains best placed — the reform effort in China and India
is significant; and the smaller, more open economies will benefit
disproportionately from strengthening demand in the U.S. and
Europe," said Drausio Giacomelli in a note to clients.
"The value of EM as a diversifier will increase once uncertainty
about the future of U.S. monetary policy eases into 2014," he added,
noting that emerging markets were just a fraction of the global
portfolio at around 3 percent or lower.
In commodity markets, gold has been getting less precious by the day
due to the winding back of U.S. stimulus and a general lack of
global inflationary pressure.
The metal was pinned at $1,202.44 on Monday after carving out a
six-month low of $1,187.80 last week. If prices stay here the metal
would have shed 28 percent this year, the largest annual loss in 32
years.
In contrast, oil prices have been supported by a positive outlook
for fuel demand in the United States and reduced Libyan supply.
Brent crude was up 7 cents on Monday at $111.84 a barrel, on top of
gains of almost 3 percent last week.
U.S. oil futures were a single cent lower at $99.31. <O/R>
(Editing by Jacqueline Wong)
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