Stock rise as U.S. jobs gain outweighs fears over Greece

by Chikako Mogi

TOKYO - Asian shares rose on Monday as surprisingly robust U.S. jobs data bolstered investor risk appetite, overshadowing worries about a lack of progress in Greek debt restructuring talks that are vital to containing the euro zone debt crisis.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.6 percent to its highest in more than five months, after the index recorded a fifth successive weekly gain last week.

Japan's Nikkei average opened up 1.2 percent.

Major stock indexes closed on Friday at multi-month highs, as sentiment was bolstered by U.S. job creation which far exceeded expectations last month and a surprise acceleration in the U.S. services sector to its highest in nearly a year.

In the euro zone, the private sector economy expanded in January for the first time since August, raising hopes the region could avoid a recession.

But Greece remained a drag as a number of major conditions demanded by the "Troika", representing Greece's European Union, European Central Bank and IMF lenders, were still outstanding. Athens must tell the EU by Monday whether they accept the stern terms of a new bailout deal. Without the deal, Athens would head for a disorderly default.

"It's a mixed bag really. Until Greece is resolved, it's hard to get too unambiguously bullish on the back of better U.S. news and liquidity from Europe," said Andrew Pease, Sydney-based chief investment strategist at Russell Investments Asia Pacific.

"It's hard to see any solution to Greece that doesn't involve some form of default," he said, adding that while the uncertainty over the Greek issue remains a source of volatility, an event risk would be "a known unknown" and not a surprise.

The euro was down 0.2 percent at $1.3127.

Latest figures dated Jan. 31 showed investors reduced their short positions in the euro last week, after five weeks of selling, but the market is still significantly short of the single currency.

TECHNICALS EYED

EPFR Global data underscored investor appetite for higher returns, with flows into Emerging Market Equity Funds hitting a 43-week high in the week ended Feb. 1. EPFR Global-tracked Bond Funds saw inflows of a net $7.47 billion during the same period for the biggest weekly total since it started tracking them about 10 years ago.

"A strong U.S. employment report fueled the risk rally further, and some investors now wonder whether it is overextended. We think it is advanced, which means selectivity is warranted, but not over," Barclays Capital said in a note.

"We see value in EM assets, including currencies. EM carry trades are supported by global central banks, growth differentials, the fading risk of a hard landing in China, clean balance sheets and positioning," it said.

After the rally late last week, many markets were nearing key resistance, which could signal a pullback.

The CBOE Volatility index VIX, which measures expected volatility in the S&P 500 over the next 30 days, closed at a seven-month low of 17.10 on Friday, reflecting improved market sentiment and receding fears of sharp market falls.

A move to the support zone around 14-15 suggested increased volatility in coming sessions.

Spot gold inched up 0.3 percent to $1,730 an ounce after falling 1 percent on Friday when the jobs data dashed hopes for more stimulus from the Federal Reserve, which had been priced into bullion's recent rally.

Asian credit markets firmed, with spreads on the iTraxx Asia ex-Japan investment grade index tightening sharply by about 10 basis points early on Monday.