Japanese shares rebounded strongly on Monday, tracking a rally in global equities following U.S.
jobs data that was solid but not strong enough to cause worry about near-term tapering of the Federal Reserve's massive stimulus.
Markets regained some stability after experiencing high volatility the past couple of weeks. They had been swung around by concerns the Fed will weaken stimulus commitment that's been instrumental in aiding risk appetites, and then by speculation Friday's jobs data would disappoint and raise worries about the U.S. economy.
U.S. nonfarm payrolls rose by 175,000 in May, more than the 170,000 forecast, which boosted U.S. and European stocks and the dollar, while U.S. Treasury debt prices fell.
The data kept intact views that if U.S. labor conditions continued to improve, it would prompt the Fed to scale down on its monthly buying of $85 billion in Treasuries and mortgage-backed securities later this year.
"The data didn't suggest an imminent tapering, but it still pointed to the direction of the Fed scaling back its quantitative easing at some point, leaving an element of uncertainty," said Ayako Sera, senior market economist at Sumitomo Trust Bank in Tokyo.
MSCI's broadest index of Asia-Pacific shares outside Japan <.miapj0000pus>, which shed 1.07 percent on Friday before the jobs data came out, was up 0.2 percent on Monday.
South Korean shares (.KS11) were up 0.3 percent, after sliding 1.8 percent on Friday for their biggest daily percentage fall in nearly 11 months. Markets in Australia and China are closed for holidays on Monday.
Sentiment may be hurt by China data over the weekend which showed unexpected weakness in May trade and domestic activity struggling to pick up.
"The China train is hardly derailing, but it does seem to be running out of puff somewhat for the moment," wrote ANZ Bank.
The Australian dollar plumbed more than 1 percent to a low of $0.9393, its lowest in 20 months, in early trade on Monday, just a tad above key support of $0.9388.
The U.S. dollar extended its gains against the yen to above 98 yen earlier on Monday, having briefly fallen below 95 to a fresh two-month low on Friday, giving up all gains made since the Bank of Japan's unprecedented stimulus unveiled on April 4. The yen selling lifted the U.S. currency to a 4-1/2-year peak against the yen of 103.74 last month.
The dollar's rebound soothed sentiment for the Japanese stock market. The Nikkei average (.N225) soared 3.1 percent, after dropping as much as 2.8 percent and temporarily entering bear market territory on Friday, losing 20 percent from a 5-1/2 year high reached two weeks ago. With an 0.2 percent drop, the Nikkei closed at its worst week in more than two years. (.T)
The Nikkei had also taken a heavy beating because of concerns Prime Minister Shinzo Abe may fail to live up to expectations, crushing over-blown optimism about the government's stimulus measures.
Abe said on Sunday the government would decide on tax cuts in the autumn to encourage companies to boost capital expenditure as part of sweeping reforms to revive the economy after nearly two decades of stagnation. The measures would add to a series of steps the government unveiled in a draft of its growth strategy last week.
In a fresh sign Japan's aggressive policies to stimulate growth are paying early dividends, its current account surplus doubled in April from a year earlier, and bank lending posted its biggest annual rise in over three years.
U.S. crude futures were up 0.1 percent at $96.10 a barrel while Brent was steady around $104.59. (O/R)
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