Asian stocks set for rebound on talk investors over-reacted to Italy's referendum "no" vote

Businessmen walk in front of an electronics stock indicator in Tokyo.
Businessmen walk in front of an electronics stock indicator in Tokyo.PHOTO: AFP

WELLINGTON (Bloomberg) - The relief rally following Italy's as-expected vote against constitutional reform is set to spread into Asia, with index futures foreshadowing stock rebounds from Tokyo to Hong Kong.

Futures on Japan's Nikkei 225 Stock Average advanced amid a pullback in the yen, after haven assets unwound an initial surge following the Italian vote. Shares in New Zealand opened higher and futures on Australia's benchmark jumped with the Dow Jones Industrial Average reaching a record on Monday.

The Australian dollar was near a more than two-week high and the nation's 10-year debt declined amid expectations the central bank will keep interest rates as is in a review. The euro was close to its strongest level since mid-November after wiping out an initial slump on the Italian premier's resignation.

Bets on future swings in the euro tumbled and a gauge tracking expected volatility in U.S. equities slid to a more than two-month low after traders - burned by the shock Brexit vote and Donald Trump's surprise victory - correctly anticipated Italy's rejection of Senate reform. Investors are pivoting back to the U.S., with the Federal Reserve's policy review just over a week away and data bolstering confidence in the world's largest economy. American services industries grew at the fastest pace in 13 months in November, a report Monday showed, further embedding bets on the Fed hiking rates.

"Investors shrugged off the anti-establishment messages from the Italian referendum to drive share prices higher," said Michael McCarthy, chief market strategist in Sydney at CMC Markets.

"Attention now turns to the Fed's interest-rate decision next week, the last listed major risk event for the year." Economists project the Reserve Bank of Australia will keep the cash rate target at 1.5 percent Tuesday, with an update on the current account also due. Japan reports on earnings and Indonesia issues data on consumer confidence, as both Taiwan and the Philippines update on consumer prices.

New Zealand's S&P/NZX 50 Index, the first major equity measure to start trading each day, added 0.3 percent as of 7:36 a.m. Tokyo time.

Futures on Australia's S&P/ASX 200 Index gained 0.9 percent in most recent trading, as contracts on the Kospi index in Seoul, the Hang Seng and Hang Seng China Enterprises gauges in Hong Kong and the FTSE China A50 Index added at least 0.2 percent.

Nikkei 225 futures rose 0.9 percent in Osaka to 18,420, while yen-denominated contracts on the index traded in Chicago climbed 0.2 percent to 18,360.

The Dow Average swung back to gains Monday, increasing 0.2 percent to an all-time high as banks and technology stocks drove the S&P 500 Index up 0.6 percent.

The euro was steady at $1.0763 after ending Monday up 0.9 percent, completely erasing an earlier slide of as much as 1.5 percent.

Japan's currency was little changed at 113.80 per dollar following a 0.3 percent retreat.

The Aussie traded at 74.75 U.S. cents, after capping a three-day climb of 1.2 percent.