By Chikako Mogi
TOKYO (Reuters) - Asian shares advanced on Wednesday, tracking global equities higher on the back of solid U.S. earnings, but the euro was pressured by soft German data underscoring the still-fragile state of the euro zone economy.
The positive tone in global equities markets despite several sluggish manufacturing surveys around the world reflected investor views that weak economic data justifies central banks maintaining monetary stimulus -- encouraging investment in shares.
MSCI's broadest index of Asia-Pacific shares outside Japan climbed 0.8 percent, led by a 1.4 percent gain in Australian shares as benign inflation data strengthened the case for more local interest rate cuts.
Australia's first-quarter core consumer price index (CPI) rose 0.3 percent on-quarter, below a 0.5 percent rise forecast in a Reuters poll, narrowing the odds of interest rate cuts from the Reserve Bank of Australia (RBA).
"With such a reading coming out there's definitely talk of room for further rate cuts. Whether or not the RBA will pull the trigger, it certainly seems that inflation is well under control," said Stan Shamu, market strategist at IG Markets.
U.S. stocks rallied on Tuesday, shrugging off data showing
U.S. manufacturing grew at its slowest pace in six months, while European shares posted their biggest one-day gain in seven months on Tuesday.
After the bell on Wall Street, Apple
According to Westpac bank, 72.8 percent of the 147 Standard & Poor's 500 companies reporting so far have beaten consensus earnings.
"Equities were underpinned by positive reports on corporate earnings and U.S. housing, some indications of progress in the Italian political arena, and perceptions that economic weakness in Europe may promote a further easing of monetary policy by the European Central Bank," Barclays Capital said in a research note.
Asian bourses also turned their attention to local earnings.
Seoul shares <.KS11> were up 0.8 percent after rising to a one-week high on Wednesday after chipmaker SK Hynix reported quarterly operating profits that handily beat forecasts, but the upside was curbed ahead of more earnings being published.
The euro was around $1.2991, managing to recover from Tuesday's two-week low of $1.2973 hit after a survey showed Germany, the euro zone's largest economy, saw business activity decline in April for the first time in five months. Traders saw it as strengthening the case for the European Central Bank to cut interest rates.
The upside for the euro was limited, given the potential for an ECB rate cut and lingering concerns about the growth outlook in the recession-hit euro-zone.
Japan's Nikkei stock average hit its highest since June 2008 in response to the firmness in U.S. equities, as well as a pause in the yen's firmness.
"I still think U.S., global money is still underweight Japan. They haven't corrected that just yet," a senior dealer at a foreign bank in Tokyo said, adding that he had two buy orders for every sell order.
The dollar was down 0.2 percent at 99.24 yen, struggling to break above the key 100-yen mark due to weak U.S. economic reports, but traders say the upcoming Bank of Japan meeting on Friday may provide an opportunity to clear that symbolic level.
Earlier in the Asian session on Wednesday, New Zealand's central bank held its benchmark interest rate at a record low 2.5 percent for the 17th straight review, reaffirming it expects to be on hold for the rest of the year as the economy picks up and inflation remains tame.
U.S. crude futures were up 0.1 percent at $89.30 a barrel while Brent inched up 0.1 percent to $100.36.
(Additional reporting by Thuy Ong in Sydney and Dominic Lau in Tokyo; Editing by Eric Meijer)
