TOKYO Asian shares and other risk assets rose on Thursday as sentiment improved after U.S. Federal Reserve Chairman Ben Bernanke reaffirmed his commitment to strong stimulus, while a smooth debt sale calmed fears over Italy's political turmoil.
The yen was defensive, with Japanese Prime Minister Shinzo Abe nominating Asian Development Bank President Haruhiko Kuroda as Bank of Japan governor, and academic Kikuo Iwata as one of the two deputy governors. Both are seen by markets to support Abe's call for unconventional reflationary stimulus measures, and that view has underpinned yen selling.
Italy's inconclusive election last weekend raised fears that the euro zone's third-largest economy could abandon its harsh fiscal reforms, but analysts and traders say they expect Rome to pursue a basic austerity path to pare down its huge debt, even if is at a more moderate pace, and that the European Central Bank will stand ready to provide funding support if needed.
The rally in equities and other risk assets showed the dimming appeal of safe-haven investments. A day after slumping nearly 1 percent on Wednesday, spot gold traded little changed around $1,597 an ounce and was headed for its longest run of monthly declines in more than 16 years.
"Right now, authorities appear to be striving to steer their policies while controlling expectations to their benefit," said Takao Hattori, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo.
"By their super-easy monetary policy, the U.S. and Japan are working on expectations for future inflation while the ECB has kept up expectations that it will not let the euro zone collapse under the weight of its debt," he said.
The MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.3 percent and was set for a monthly gain of 0.4 percent.
Australian shares rose 0.8 percent, Hong Kong shares added 0.9 percent and Indonesian stocks continued their bull run to hit another record high after closing on Wednesday at a record.
Japan's Nikkei stock average climbed 0.9 percent as the yen softened.
Bernanke, speaking before Congress for a second day, downplayed on Wednesday signs of internal divisions, saying the policy of quantitative easing has the support of a "significant majority" of top central bank policymakers.
U.S. stocks rallied, cheered also by the biggest jump since December 2011 in durable goods orders last month, as the solid gauge of planned U.S. business spending signalled increased confidence in the durability of the economic recovery.
Uncertainty over an imminent U.S. fiscal tightening could dampen the positive mood, however, as President Barack Obama and Republican congressional leaders have not reached a deal to avoid the $85-billion in automatic "sequestration" spending cuts, due to start on Friday.
Regional data released on Thursday was mixed.
Australian business investment showed a surprise fall last quarter as firms outside the red-hot mining sector cut back, while estimates of future spending confirmed the long boom in resource investment was likely to end this year.
Japan's industrial output, on the other hand, rose for a second straight month in January, offering some evidence that the export-reliant economy may be emerging from a mild recession, taking strength from a pick-up in global demand and the weaker yen.
European shares rebounded from the previous session's tumble on Wednesday, supported by a well-bid Italian bond auction.
Italy's borrowing costs rose to their highest in four months on Wednesday at the first bond auction since this week's inconclusive election but solid demand from domestic investors eased fears that the political deadlock could destabilize Europe's second-biggest sovereign debt market.
"While markets still wonder whether Italian politics will derail the weak recovery, they seem eager to downplay the heightened political risks," Barclays Capital said in a note.
"Indeed there is room for optimism -- if the Italian risks remain contained -- as signals of stabilization continue to emerge," it said.
The euro inched up 0.1 percent to $1.3145, well above a seven-week low of $1.3018 on Tuesday.
The yen eased 0.2 percent against the dollar to 92.41. The yen hit its lowest since May 2010 of 94.77 on Monday before the outcome of the Italian vote rattled financial markets and sent the yen soaring to 90.85 yen.
The yen also fell 0.3 percent against the euro to 121.44 after jumping to 118.74 on Monday.
U.S. crude rose 0.4 percent to $93.10 a barrel while Brent rose 0.3 percent to $112.22.
(Editing by Eric Meijer)