Asian shares steadied on Tuesday as investors maintained hope that Europe will take further action to tackle its debt crisis and the United States and China will adopt stimulus measures to boost growth.
Investors are awaiting the outcome of Australia's central bank policy meeting later on Tuesday, but do not expect an easing, after improving local data. A statement is due at 0430 GMT.
Major China data on Thursday will have a greater impact as investors look for signs the world's second-largest economy has improved from a lacklustre first half.
MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> was little changed, holding near a three-month high hit the day before.
Japan's Nikkei stock average opened 0.1 percent lower, after Wall Street rose to a three-month high and European shares closed at their highest level in more than four months on Monday.
Sentiment improved as yields in Spain and Italy inched lower on Monday on expectations the European Central Bank will follow through with last week's statement which hinted at upcoming policy steps to contain Madrid's surging borrowing costs.
"The bid to risk is likely to be sustained in coming weeks on the back of attractive valuations and market anticipation of policy action out of Europe, China and even the U.S.," Morgan Stanley said in a research note.
China is due to release a slew of July data including industrial production, retail sales and inflation on Thursday. Traders and investors will be looking for signs of whether its economy can pick up momentum in the second half of the year.
Asian credit markets firmed, with the spread on the iTraxx Asia ex-Japan investment-grade index narrowing by 3 basis points.
Asset returns in 2012: http://link.reuters.com/muc46s
The euro eased 0.1 percent to $1.2391, having hit a one-month high of $1.2444 on Monday.
The Australian dollar traded at $1.0561, holding near its 4-1/2 month high of $1.0594 touched on Monday, as investors awaited the outcome of the Reserve Bank of Australia's (RBA) policy meeting, with expectations for a steady rate at 3.5 percent following cuts in May and June.
"Trends are slowly forming as risks to reward ratios see steady improvements in an ultra low volatility environment," said Sebastian Galy, strategist at Societe General, noting that authorities in solid economies may be increasingly wary of an improving risk environment leading to a rapid appreciation of their currency.
"Australia is a typical example of this ... It means that they will be more reluctant than they used to, to see their currency shoot through the roof. The RBA is widely expected to be on hold at its upcoming meeting given better economic data, nonetheless the tone is to be watched," he said.
Possibly reflecting a gradual increase in confidence for Europe to deal with its debt crisis, Morgan Stanley's filing showed on Monday its net exposure to five troubled euro zone nations - Greece, Ireland, Italy, Portugal and Spain - spiked 73 percent in the second quarter.
Morgan Stanley reduced hedges against the risk that those exposures might turn into losses. At the same time it significantly cut its exposure to France, flipping to a net short position against French sovereign bonds.
This comes after Europe agreed to a broad framework to shore up the region's troubled banks in late June.
