TOKYO (Nov 18): Japanese shares led a tentative recovery in Asian markets on Tuesday, drawing some support from two U.S. blockbuster acquisitions and anticipation of more European monetary stimulus.
A day after shock data showing Japan slipping into recession had rattled financial markets, Japan's Nikkei rose 1.7 percent, erasing about a half of Monday's 3.0 percent fall.
Prime Minister Shinzo Abe is expected to announce later in the day that he is calling a snap election, banking on the ruling Liberal Democrat Party (LDP) trouncing a weak opposition to reaffirm the mandate to pursue his reflationary economic policies despite the slumping performance.
"While there has been some decline in the support rate for Abe's cabinet there has been no accompanying rise in the support for the opposition from the depressed level. We would therefore expect the main ruling LDP to maintain its majority and for Abenomics to continue," said Miyuki Kashima, managing director at BNY Mellon Asset Management. "As a result, our positive view on the (Japan) market remains unchanged."
MSCI's broadest index of Asia-Pacific shares outside Japan stood little changed.
On Wall Street, the S&P 500 rose slightly to a record closing high on Monday, helped by deal activity worth $100 billion and hopes of more European stimulus.
On Monday, oil field service company Halliburton Co said it will buy Baker Hughes Inc for about $35 billion, while Botox maker Allergan Inc was seen nearing a buyout deal worth up to $65.5 billion by Actavis Plc.
European Central Bank President Mario Draghi said the central bank was ready to provide further stimulus if its current efforts are not sufficient to accelerate the region's recovery, adding such new measures could include purchases of sovereign bonds.
"Hopes for an ECB stimulus would underpin European shares. Still, the impact of stimulus would not last that long, as you can see in Japan," said Soichiro Monji, chief strategist at Daiwa SB Investments.
Investors sold the euro on prospects of further easing by the ECB, preferring to hold dollars as the U.S. Federal Reserve is expected to raise rates next year.
The euro eased to $1.2467 from a 2 1/2-week high of $1.2580 hit the previous day.
The dollar traded little changed at 116.58 yen, near a seven-year high of 117.06 struck in the wake of Monday's shocking GDP data.
The Australian dollar also benefitted from investors turning away from the euro zone and Japan in search of higher yields. The Aussie rose 0.2 percent to $0.8725.
"I see a risk for the AUD/USD to be squeezed higher because of capital flows into Australia," said Greg Gibbs, a strategist at Royal Bank of Scotland in Singapore.
Gold lost momentum on the dollar's strength, trading at $1,188.60, off a 2 1/2-week high of $1,193.95 hit on Monday.
Oil prices sagged as recession in Japan, the world's fourth largest crude importer, added to oversupply worries. But prices managed to hover above four-year lows as Russia and Venezuela appeared to be coordinating a price defence plan.
U.S. crude futures were down 31 cents at $75.34 per barrel but off Friday's four-year low of $73.25.