Asian markets higher after Berlusconi vows to go

HONG KONG—Asian markets rose on Wednesday after Italian Prime Minister Silvio Berlusconi promised he would quit, lifting hopes that Europe’s two-year-old debt crisis can be contained.

Adding to buying sentiment was data out of China showing that the country’s inflation had slowed sharply last month, raising the prospect that the government could start to ease monetary policy.

Tokyo was 1.15 percent, or 99.93 points, higher at 8,755.44 while Sydney closed 1.22 percent, or 52.3 points, higher at 4,346.1 and Seoul gained 0.23 percent, or 4.39 points, to 1,907.53.

Hong Kong was up 1.71 percent, or 335.96 points, at 20,014.43 and Shanghai added 0.84 percent, or 21.08 points, to end at 2,524.96.

Berlusconi’s hand was forced after his coalition lost its parliamentary majority in a procedural vote on budgetary legislation. The 75-year-old prime minister said he would step down once a key austerity budget has been passed.

The yield on 10-year Italian bonds fell to 6.65 percent in Asian hours, well down from the record 6.77 percent seen before his announcement.

However, in early trade in Europe the yield soared over 7.0 percent, the highest since June 1997, as dealers grow concerned at the new political uncertainty.

Italian stocks, which opened higher, soon tumbled more than three percent on fears that an impending election could weaken the country further.

“Risk appetite is improving, with investors favoring cyclicals over defensives amid relief that Berlusconi is stepping down,” said CBA institutional equities head of sales Justin Rooney in Sydney, according to Dow Jones Newswires.

Markets have been punishing Italy for weeks over what is seen as Rome’s inability to make necessary changes to balance the budget and keep on top of its debt, which is equal to 120 percent of gross domestic product.

However, Credit Agricole warned in a note that the euro would stay under pressure and markets on edge until political deadlock in Italy and Greece is resolved.

Berlusconi’s move came days after George Papandreou, the Prime Minister of debt-weary Greece, said he would step aside and allow a unity government to take over in a bid to drag the country out if its financial mess.

In afternoon Asian trade on Wednesday the euro fetched $1.3833 and 107.21 yen against $1.3836 and 107.50 yen in New York late Tuesday. In European trade, the single European currency slipped to $1.3718.

The dollar edged down to 77.56 yen from 77.70 yen.

The news from Rome on Tuesday sent Wall Street into positive territory after it spent the day in the red. The Dow rose 0.84 percent, the Nasdaq added 1.20 percent and the S&P 500 added 1.17 percent.

Beijing said Wednesday that its consumer price index – a key gauge of inflation –  rose 5.5 percent year on year, its slowest pace since May, after more than a year of monetary tightening measures.

The figure is well down from the three-year high of 6.5 percent posted in July, and boosted hopes the government will ease up on liquidity restrictions.

On oil markets New York’s main contract, light sweet crude for delivery in December, gained 34 cents to $97.14 per barrel in the afternoon.

Brent North Sea crude for December delivery advanced 45 cents to $115.45.

At 1100 GMT gold was at $1,783.30 an ounce against $1,795.30 late Tuesday.

In other markets:

— Singapore closed down 0.27 percent, or 7.86 points, at 2,858.66.

Wilmar International fell 4.11 percent to 5.36 and Keppel Corp shed 0.75 percent to 9.30.

— Taipei dipped 0.51 percent, or 38.93 points, to 7,561.86.

HTC rose 0.77 percent to Tw$655.0 while Taiwan Semiconductor Manufacturing Co was 0.54 percent lower at Tw$74.1.

— Manila gained 0.73 percent, or 31.53 points, to 4,346.20.

Jollibee Foods rose 5.7 percent to 95 pesos, Metro Pacific Investments added 3.6 percent to 3.38 pesos and Ayala Land gained 1.0 percent to 15.90 pesos.

— Wellington closed flat, edging up 2.33 points to 3,353.56.

Telecom Corp. was unchanged at NZ$2.69, Fletcher Building slipped 0.6 percent to NZ$6.48 and Air New Zealand rose 0.5 percent to NZ$1.06.

— Kuala Lumpur rose 0.62 percent, or 9.18 points, to 1,489.64.

Telecoms group Axiata gained 2.69 percent to 4.96 ringgit, while oil and gas firm SAAG Consolidated fell 6.25 percent to 0.08 ringgit.

— Jakarta gained 1.36 percent, or 51.72 points, to 3,857.36.

— Bangkok dropped 1.59 percent, or 15.60 points, to 967.84.

— Mumbai slid 1.18 percent, or 207.43 points, to 17,362.1.

India’s largest commercial bank State Bank of India fell 6.76 percent to 1,862.5 rupees, while the country’s only listed microlender, SKS Microfinance, slid 8.64 percent to 175.55.