Asian shares, euro extend gains as debt fears ease

The euro also strengthened against the dollar and the yen as fears over the eurozone crisis abated while financial plays were lifted by more upbeat earnings reports from US banks.

Tokyo gained 1.47 per cent, or 126.68 points, to 8,766.36, Sydney was 0.59 per cent higher, adding 24.8 points to 4,239.6 and Seoul climbed 1.82 per cent, or 34.92 points, to 1,949.89.

Hong Kong rose 0.84 per cent, or 167.42 points, to 20,110.37 -- moving above 20,000 for the first time since early November.

Shanghai climbed 1.00 per cent, or 23.05 points, to 2,319.12 after preliminary data showed contraction in manufacturing activity in January had slowed.

On Thursday Paris and Madrid raised funds at much lower rates on the bond markets in their first auctions since their ratings were cut last Friday by Standard & Poor's.

Spain sold a total of 6.609 billion euros, well above the 3.5-4.5 billion euros planned, while the average rate on its 10-year bonds plunged to 5.403 per cent from the 6.975 per cent paid at a comparable auction on November 17.

France raised 9.46 billion euros in a sale closely watched as a test of appetite for its debt after S&P stripped the country of its triple-A rating.

The average yield on benchmark 10-year bonds dropped to 1.07 per cent from 2.32 per cent on November 17, with bids over three times the amount offered.

In Greece officials were locked in talks with the country's creditors to hammer out a plan to cut its debt of more than 350 billion euros by just under a third.

The eurozone has insisted private creditors take losses of at least 50 per cent on their holdings of Greek bonds. Athens needs the debt reduction deal and the 130 billion euros in additional funds the eurozone has offered before major bond repayments are due in March or it could face a default.

Greek officials have said they see a deal as possible by the end of the week.

"Notwithstanding some cynics who question the mechanisms behind the European bond auctions, and lingering doubts about whether Greece will reach agreement with creditors, it just appears that the downside (for markets) has been plumbed," said BBY senior institutional trader Peter Copeland in Sydney.

Across the Atlantic, hopes that the US economic recovery is gaining traction were boosted by data showing weekly new claims for unemployment benefits fell to their lowest level since April 2008.

Also, the consumer price index was unchanged for the second straight month in December.

And on the corporate front, investment bank Morgan Stanley reported a $4.2 billion profit for 2011, while Bank of America posted a $1.4 billion profit, wiping away a brutal loss the year before amid a savage streamlining.

US investors welcomed the news, lifting the Dow 0.36 per cent, while the S&P 500 added 0.49 per cent and the tech-rich Nasdaq advanced 0.67 per cent.

On forex markets the euro continued its advance higher, heading back towards $1.30 and 100 yen as traders took on more risk.

The common unit bought $1.2926 in early European trade, more than a cent higher than Tokyo on Thursday.

It was also at 99.85 yen compared with 98.68 yen in Asia Thursday, while the dollar fetched 77.24 yen from 76.75 yen.

New York's main contract light sweet crude for delivery in February gained 14 cents to $100.53 per barrel and Brent North Sea crude for March delivery was up 10 cents to $111.65.

Gold was at $1,650.25 an ounce at 0900 GMT, against $1,663.60 late Thursday.

In other markets:

-- Singapore rose 1.36 per cent, or 38.18 points, to 2,849.38.

Beverage distributor Fraser and Neave Ltd shed 0.16 per cent to Sg$6.42 and United Overseas Bank gained 0.65 per cent to Sg$16.96.

-- Manila gained 1.01 per cent, or 47.53 points, to 4,474.90.

Top-traded Philippine Racing Club was up 8.62 per cent at 9.45 pesos, Philippine Long Distance Telephone added 0.63 per cent to 2,868 pesos and while Petron Corp. gained 2.61 per cent to 11.80 pesos.

-- Wellington rose 0.36 per cent, or 11.72 points, to 3,276.46.

Fletcher Building was up 0.64 per cent at NZ$6.28 and Telecom Corp. lifted 1.47 per cent to NZ$2.08.

-- Jakarta fell 0.36 per cent, or 14.56 points, to 3,986.52.

Bank Rakyat Indonesia fell 1.4 per cent to 7,050 rupiah while cement maker Semen Gresik fell 4.8 per cent to 11,850 rupiah.

-- Kuala Lumpur was 0.39 per cent, or 5.85 points higher at 1,522.66.

Malayan Banking added 0.73 per cent to 8.26 ringgit, Public Bank gained 0.30 per cent to 13.30 ringgit and RHB Capital lost 0.14 per cent to 7.29 ringgit.

-- Bangkok was flat, edging down 0.28 points to 1,058.66.

-- Mumbai was 0.57 per cent or 95.27 points higher to 16,739.01, its second straight day of gains.

-- Taipei was closed for a public holiday.

-- Dow Jones Newswires contributed to this story --