Record Wall Street boosts sentiment, U.S. holds key in Q2

Fri Mar 29, 2013 2:59am EDT
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By Chikako Mogi

TOKYO (Reuters) - Whether the world's largest economy can sustain momentum will be a primary focus for investors for the next three months after a general recovery trend in the United States helped risk sentiment for broad markets in the first quarter of 2013.

Asian shares edged higher and the euro steadied on Friday after banks in Cyprus reopened to relative calm. Overall trade was subdued, with many Asian markets, including Australia, Singapore and Hong Kong, closed on Friday for Easter holidays.

European and U.S. markets will also shut for Easter Friday.

The MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was up 0.2 percent for a quarterly 1.5 pct gain, the worst performance in three quarters. The pan-Asian index touched a 1-1/2-year high in February.

The first quarter was marked by growing optimism about global growth, particularly with data pointing to a recovery in the U.S. economy that fed speculation the U.S. Federal Reserve might scale back its aggressive stimulus earlier than planned.

Such views spurred strong rallies in U.S. equities while underpinning the dollar, breaking the usual negative correlation between U.S. equities and the dollar.

The U.S. economy shows a seasonal tendency to weaken in the second quarter and effects of fiscal tightening may compound the bearish trend, with property regulations clouding China's growth prospects also providing potential risk.

The euro zone's financial crisis re-emerging in one form or another from time to time remains another downside risk. Worries over Chinese growth and the euro zone were not as severe as in past years, due to the brightening global growth outlook and safety nets being placed in Europe, along with the extremely accommodative monetary policy stance of major central banks.   Continued...

Men walk past logos at the Tokyo Stock Exchange in Tokyo February 6, 2013. REUTERS/Toru Hanai