Asian stocks were mostly higher Wednesday, extending their recent rally into an eighth straight day, inspired by hopes massive U.S. government spending and tax cuts will continue to support the dollar and stimulate demand for exports.
The string of gains was the longest since October 2007, supported by a rebound on Wall Street and a steady improvement in Asian investment grade credit spreads as policymakers slash interest rates and pour capital into struggling industries to mitigate damage from the financial crisis.
Meanwhile, the U.S. dollar was heading for a fourth day of gains against the euro, on expectations U.S. President-elect Barack Obama will soon unveil a package of spending and tax cuts worth around $775 billion.
The U.S. dollar was broadly higher against major currencies, approaching a one-month high against the euro and the yen . Oil futures were steady below $49 a barrel.
Japan's Nikkei 225 Average rose 1.7 percent to hit a two-month closing high as exporters such as Honda Motor surged on a softer yen and amid hopes for a U.S. stimulus package to boost the economy. The benchmark logged its first seven-day winning streak in nearly three years, gaining 8.5 percent during the period, including two half-days of trading before and after the New Year holiday.
Seoul shares ended up 2.8 percent to hit a three-month closing high led by technology issues such as Samsung Electronics, up on hopes of firmer memory chip pricing, while POSCO rose on a potential output cut.
Australian stocks extended their rally, finishing 1 percent higher, lifted by the top miners on tentative optimism that generous spending by governments around the world may speed up an economic recovery. Having lagged offshore gains in the first two trading days of the new year, Australia caught up on Tuesday and Wednesday as the few traders in the market drove up previously shunned miners and investment bank Macquarie Group. BHP Billiton, rose 2.8 percent, while Rio Tinto surged 8 percent, outperforming BHP as Rio's aluminium arm stood to gain from planned output cuts by top U.S. aluminium producer Alcoa. Iron ore prospector Brockman Resources reversed losses of more than 3 percent to close 5.6 percent higher.
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Hong Kong shares gave up early gains to close 3.4 percent lower, hurt by news Bank of America was selling a China Construction Bank stake, triggering worries of a similar equity sell-down in other lenders. Chinese telecom stocks also fell after Beijing confirmed it was handing out the long-awaited licences for next generation (3G) mobile networks. China Unicom, which soared nearly 17 percent on hopes for an imminent issuance of the 3G licences, sank 10.6 percent by the close. China Mobile gave up 5.5 percent.
Singapore's Straits Times Index was down 1.7 percent. Singapore-listed real estate investment trusts (REITS) soared after CapitaCommercial Trust refinanced a maturing bond worth about S$580 million ($394.3 million), easing concerns about REITs' ability to roll over their debt amid a global credit squeeze. CapitaCommercial shares closed 7 percent higher.
Chinese stocks closed mostly lower in active turnover. Many second-tier shares gained but blue chips were sluggish and telecommunications-related shares were hit by profit-taking.