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 The cheer was expected to extend into European trading, with
financial spreadbetters predicting Britain's FTSE 100 would open up
0.4 percent. Germany's DAX was seen opening 0.5 percent higher, and
France's CAC 40 was called to open up 0.6 percent.
"European equities are set to start with modest gains this morning
as the prospect of loose monetary policy continues to give a little
more fleeting upwards momentum," said Jonathan Sudaria, dealer at
Capital Spreads.
"However, the fact that the bulls have to rely on what was once
deemed to be 'emergency' measures to go higher should actually be
reassuring to the bears," he said in a note to clients.
MSCI's broadest index of Asia-Pacific shares outside Japan was up
0.8 percent in afternoon trade, after earlier touching its highest
levels since Sept. 18.
Japan's Nikkei ended up 1 percent, extending its rebound from an
eight-month low hit a week ago.
"One of the two big persistent concerns has faded, so investors are
taking risks," said Masashi Oda, senior investment officer at
Sumitomo Mitsui Trust Bank, referring to expectations of a near-term
Fed hike.
"Short-covering by those who had shorted stocks on those worries
will likely support the market for a while."
Japanese shares garnered further momentum from speculation that the
Bank of Japan might expand its stimulus program to support the
flagging economy.
The BOJ began its two-day policy meeting on Tuesday, at which it is
widely expected to hold monetary policy steady. But a surprise
cannot be ruled out, and pressure is building on the central bank to
act.
At its next meeting on Oct. 30, the BOJ is expected to cut its
long-term economic and price projections.
Also underpinning sentiment, 12 Pacific Rim countries including the
United States, Japan and Canada reached the most ambitious trade
pact in a generation, though some analysts say the benefits of the
far-reaching plan are far from clear at this point.
"The market seem to be driven by speculation on policy steps,
including uncertain benefits from the Trans-Pacific Partnership (TPP),"
said Hitoshi Ishiyama, chief strategist at Sumitomo Mitsui Asset
Management.
Fed officials have said the central bank is likely to raise rates
this year as the U.S. economic recovery progresses, but surprisingly
weak U.S. jobs data on Friday led many investors to abandon
expectations of a rate hike by the year-end.
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That boosted sentiment towards riskier assets, which have been long
hit by threats of higher dollar borrowing costs as well as fears of
a deeper slowdown in China.
Wall Street rallied overnight, and MSCI's broadest gauge of world
stocks rose 1.9 percent on Monday to its highest level in more than
two weeks.
Signs of a bounce in battered commodity prices helped soothe
concerns of a global slowdown and lifted shares of energy and
resource companies.
Global crude benchmark Brent was up 0.4 percent on Tuesday at $49.42
a barrel after soaring 2.3 percent overnight, led by a rally in U.S.
gasoline and Russia's willingness to meet other major oil producers
to discuss market conditions.
Brent edged closer to the top end of its rough $46-$50 trading band
in the past month. U.S. crude was up 0.2 percent at $46.35 after
gaining 1.6 percent in the previous session.
The dollar was mixed against major currencies as the headwinds from
fading expectations for a Fed hike were countered by positive risk
sentiment. The dollar index, which tracks the greenback against a
basket of six major currencies, slipped about 0.1 percent to 96.036.
The dollar traded at 120.38 yen, down about 0.1 percent, while
the euro traded at $1.1188, down slightly.
The Reserve Bank of Australia kept rates at a record low of 2
percent as widely expected, and said Australian dollar is adjusting
to lower commodity prices.
After the decision, the Australian dollar erased modest earlier
losses and added about 0.6 percent to $.07124, after hitting a
two-week high of $0.7135.
(Additional reporting by Ayai Tomisawa in Tokyo; Editing by Kim
Coghill and Eric Meijer)
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