TOKYO – Asian shares, the euro and the Australian dollar inched up on Tuesday after an unexpected expansion in U.S. factory activity buoyed sentiment, although risk assets remained capped by prospects of continued sluggish global growth.
Markets in China, Hong Kong and India are closed for holidays on Tuesday.
The MSCI index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> was 0.1 percent higher, with Australian shares <.AXJO> up 0.3 percent and South Korean shares <.KS11> up 0.1 percent.
Japan's Nikkei stock average <.N225> opened up 0.3 percent after hitting a three-week low on Monday. <.T>
Wall Street stocks ended higher after closing out their best third quarter since 2010, as data showed U.S. manufacturing surprisingly grew last month for the first time since May. That helped the dollar weaken and commodities to rise while eroding safe-haven demand weighed on the yen. The euro rebounded off three-week lows.
But euro zone factories suffered their worst quarter since early 2009 and China lost steam, suggesting the global economy faces hurdles as it tries to outrun recession.
U.S. Federal Reserve Chairman Ben Bernanke said the U.S. central bank did not foresee a recession but that growth was too slow to bring down the nation's jobless rate. U.S. jobs data due on Friday will offer the first glimpse into the state of the U.S. economy after the Fed embarked on new stimulus last month.
Barclays Capital said the environment for risk assets remains supportive, even given recent weak data on global manufacturing. It noted that the response in financial markets to the data has been measured as investors have been reassured by policy steps in Europe and the United States.
"Expectations for the recovery have been ratcheted down enough to mitigate the risk of disappointed and anxious reactions," it said in a research note.
The euro was a few pips higher at $1.2895, off a three-week low of $1.28035 touched on Monday, but was vulnerable as investors waited for Spain to seek a sovereign bailout and remained wary of a possible Moody's credit rating cut of Spain to junk status.
The Australian dollar edged higher to $1.0366 ahead of the Reserve Bank of Australia's policy decision due at 0430 GMT. Markets have priced in a 62 percent chance of a quarter-point cut in the 3.5 percent cash rate.
"The RBA meeting presents quite a risk to short AUD positions, should they decide to keep rates unchanged," said Mary Nicola, a strategist at BNP Paribas, adding that the RBA was expected to stand pat and then cut in November.
The RBA kicks off a week of central bank policy decisions, with the European Central Bank, the Bank of England and the Bank of Japan following later this week.
Other key events include the Eurogroup meeting next Monday.
Greece unveiled on Monday a harsher austerity budget for 2013 which aims to pave the way for an international aid crucial to keep the country solvent as its finance minister met global lenders. Greek Finance Ministry officials said the lenders still objected to some of the measures.
Spain is ready to request a euro zone bailout for its public finances as early as next weekend but Germany has signaled that it should hold off, European officials said on Monday. Spain has announced severe 2013 budget and economic reforms and the result of stress tests on its banks, moves seen to clear the way for such aid.
"The Spanish government probably thinks it needs to find a way of presenting the request for assistance as a victory of sorts, just like it did for the bank deal, to its electorate," Societe Generale said in a research note on bonds.
"We still like longs in peripheral risk over a one to two-month holding period ... We prefer to put longs back on any substantial weakness, such as a Moody's downgrade of Spain."
Spot gold rose 0.2 percent to $1,776.49 an ounce, after marking a high of $1,791.20 on Monday, its strongest level since mid-November on both fund buying and possible central bank demand.
U.S. crude inched down 0.1 percent to $92.37 a barrel and Brent was little changed at $112.22.
(Additional reporting by Ian Chua in Sydney; Editing by Edwina Gibbs)