Asian stocks rose on Friday and the euro clung to gains from a 2-cent rally after euro zone policymakers moved to shore up struggling banks and fend off a financial crisis.
The European Central Bank (ECB) announced aggressive liquidity measures on Thursday, throwing a lifeline to lenders who have seen wholesale funding drying up as market confidence ebbed, and the European Union said it would present a plan for a coordinated recapitalisation of banks by member states.
Gold, oil, copper and equities were all on course to post weekly gains on hopes that Europe's leaders may finally be getting to grips with a two-year-old sovereign debt crisis, although the scale of the task meant caution remained high.
"There are still plenty of problems that face the European financial system," said Greg Gibbs, strategist at RBS in Sydney. "The risk rally will probably run out to steam in the next week."
Fears that the crisis is heading inexorably towards a default by Greece — and possibly others — that could trigger turmoil in the banking system have caused a sharp sell-off in riskier assets since late July.
AWAITING U.S. JOBS REPORT
Tokyo's Nikkei share average rose 1.1% on Friday, while MSCI's broadest index of Asia Pacific shares outside Japan climbed 2.8%, led by a 4.2% gain from the materials sector.
U.S. stocks rose more that 1.5% on Thursday, as global stocks posted their third straight day of gains.
S&P 500 index futures traded in Asia were mildly negative, indicating some caution ahead of the non-farm payrolls report later, a weekly jobs gauge that is always closely watched for clues on the state of the U.S. economy.
"No one wants to take a big position ahead of the U.S. jobs report later in case there is a downside surprise," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments in Tokyo.
Asian emerging markets have been punished hard in the market slide of recent months, with MSCI's Asia ex-Japan index falling more than 25% from its April high for the year, partly due to foreign fund managers taking money out of markets that had been outperforming to cover losses elsewhere.
Citigroup analysts said in a note that outflows from emerging market equity funds, which often set the overall market direction, had accelerated in the week to October 5, with a net $1.3 bln pulled from Asia.
RETURN OF RISK
The European Central Bank said on Thursday it was ready to buy bonds to provide longer-term cheap money for European lenders in need of funding.
And, in a further boost, European Commission President Manuel Barroso said the EU's executive arm was proposing coordinated action to cleanse banks of toxic assets, the most explicit statement yet from a top European official on joint action to help restore battered confidence in the sector.
The euro, which has fallen back from a 2011 peak near $1.50 in May, was steady around $1.3427 , after jumping from a low of $1.3240 on Thursday.
While sme investors were disappointed the ECB did not also cut interest rates, riskier assets such as equities, commodities and currencies linked to commodity markets, such as the Australian dollar, rallied.
Copper rose around 1.3% on Friday, extending a gain of nearly 6% in the previous session, but oil eased a little after a 3% bounce on Thursday.
Brent crude slipped 0.2% to $105.55 a barrel and U.S. crude was flat at $82.57.
As some confidence returned, credit markets tightened, with spreads measured by iTraxx's Asia ex-Japan investment grade corporate index coming in about 10 basis points, after a sharp widening at the start of the week.
Japanese government bonds eased, with the benchmark 10-year yield rising 1.5 basis points to 0.985%.
"If the U.S. jobs report shows strong figures, we may see more unwinding," said a fund manager at a Japanese asset management firm. "But a sharp correction in JGB prices is unlikely as investors' concerns are centred on the euro zone debt crisis, which will not be resolved easily."
