Risk assets rebound on earnings, policy expectations

By Chikako Mogi

TOKYO (Reuters) - Risk assets rebounded broadly on Wednesday as a sharp sell-off over the past two sessions lured bargain hunters, with sentiment bolstered by positive American corporate earnings and data supporting the case for ongoing U.S. monetary stimulus.

The yen resumed its downtrend as markets regained some stability, as investors were seen to be liquidating some of their excessively built-up positions.

Gold, which led the heavy liquidation of assets across the board after weaker-than-expected Chinese and U.S. economic reports earlier in the week stoked concerns about slowing global growth, rose 1 percent to a session high of $1,381.80 but remained volatile.

Crude oil futures also firmed, with U.S. crude inching up 0.1 percent to $88.84 a barrel, crawling up from a four-month low of $86.06 hit on Tuesday. Brent rose 0.4 percent to $100.29 a barrel, after breaching below $100 for the first time in nine months on Tuesday.

"We're now going through an uncertain period for risk assets, really. The market is becoming a bit choppy and just range-bound as investors become a bit uncertain which way the market wants to swing this time around," said Stan Shamu, market strategist at IG Markets.

The MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.4 percent after shedding as much as 1 percent to come close its 2013 low in the previous session.

The recovery in commodities soothed investor sentiment in resources-rich Australia, pushing its shares up 0.9 percent.

South Korean shares bucked the trend, easing 0.2 percent on earnings concerns after Samsung Engineering reported first-quarter losses on Tuesday, highlighting the vulnerability of firms with overseas exposures.

"The main board has lost ground, nearing a price-to-book value of 1 as weak corporate earnings from companies that earn their living through overseas orders have fanned investor caution," said Han Beom-ho, an analyst at Shinhan Investment Corp, of Seoul shares.

The International Monetary Fund on Tuesday trimmed projections for global economic growth for this year and next to take into account government spending cuts in the United States and the latest struggles of recession-stricken Europe.

Japan's Nikkei average climbed 1 percent as the yen weakened. The Nikkei tumbled as much as 2 percent on Tuesday when the yen's rebound took a toll on sentiment.

"After seeing a pull-back, there is an opportunity for buying on the dips," Yutaka Miura, a senior technical analyst at Mizuho Securities, said of Japanese shares.

European shares fell on Tuesday on weak ZEW German consumer confidence numbers and heightened concerns about the earnings outlook for European companies. But U.S. stocks gained over 1 percent after strong earnings from some of America's biggest companies such as Coca-Cola and Johnson & Johnson.

U.S. consumer prices fell in March for the first time in four months and factory output slipped, reinforcing the view that the Federal Reserve will maintain its ultra-easy monetary policy stance to support economic growth.

"We still believe that the recent volatility in the commodity prices was mainly driven by long position liquidation, while the underlying backdrop remains risk-positive due to expanding global monetary easing," said Vassili Serebriakov, strategist at BNP Paribas.

U.S. gold futures hit a session low of $1,365 and last traded at $1,380.2, after plunging to $1,321.50 on Tuesday, their lowest level since September 2010. Spot gold shed as much as 2.3 percent to $1,321.35, the lowest level in more than two years, on Tuesday.

Holdings at SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.73 percent to 1145.92 tonnes on Tuesday, while holdings of global gold ETFs were at their lowest in more than a year.

The dollar gained 0.7 percent to 98.19 yen after touching a low of 95.67 yen on Tuesday, while the euro rose 0.4 percent to 129.35 yen, well above Tuesday's low of 125 yen.

"In contrast to prior growth scares, stocks in the sweet spot of monetary policy -- high quality, high dividend yield, low volatility -- are supporting the broader market," said Barclays Capital in a research. "The question remains if the market can hold up in the face of a soft global growth outlook."

(Additional reporting by Ayai Tomisawa in Tokyo; Ian Chua and Thuy Ong in Sydney; Joyce Lee in Seoul; Editing by Eric Meijer)

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