Asian markets higher after Berlusconi quit vow

HONG KONG, Nov 9 (AFP): Asian markets rose on Wednesday after Italian Prime Minister Silvio Berlusconi promised he would quit, lifting hopes that Europe's two-year-old debt crisis can be contained. Adding to buying sentiment was data out of China showing that the country's inflation had slowed sharply last month, raising the prospect that the government could start to ease monetary policy. Tokyo was 1.15 per cent, or 99.93 points, higher at 8,755.44 while Sydney closed 1.22 per cent, or 52.3 points, higher at 4,346.1 and Seoul gained 0.23 per cent, or 4.39 points, to 1,907.53. In the afternoon Hong Kong was up 1.71 per cent, or 335.96 points, at 20,014.43 and Shanghai added 0.84 per cent, or 21.08 points, to end at 2,524.96. Berlusconi's hand was forced after his coalition lost its parliamentary majority in a procedural vote on budgetary legislation. The 75-year-old prime minister said he would step down once a key austerity budget has been passed. The yield on 10-year Italian bonds fell to 6.65 per cent in Asian hours, well down from the record 6.77 per cent seen before his announcement. However, in early trade in Europe the yield hit another record high of 6.86 per cent as dealers grow concerned at the new political uncertainty. Italian stocks, which opened higher soon tumbled 3.1 per cent on fears of an impending election that could weaken the country further. The record-high cost of borrowing for Italy, the eurozone's third largest economy, was close to the seven per cent that would likely lead to a bailout, as happened when Portugal and Ireland called for help. "Risk appetite is improving, with investors favouring cyclicals over defensives amid relief that Berlusconi is stepping down," said CBA institutional equities head of sales Justin Rooney in Sydney, according to Dow Jones Newswires. Markets have been punishing Italy for weeks over what is seen as Rome's inability to make necessary changes to balance the budget and keep on top of its debt, which is equal to 120 per cent of gross domestic product. However, Credit Agricole warned in a note that with yields still "dangerously close to the 7 per cent level", the euro will stay under pressure and markets on edge until political deadlock in Italy and Greece is resolved. Berlusconi's move came days after George Papandreou, the Prime Minister of debt-weary Greece, said he would step aside and allow a unity government to take over in a bid to drag the country out if its financial mess. In afternoon Asian trade on Wednesday the euro fetched $1.3833 and 107.21 yen in Tokyo trade against $1.3836 and 107.50 yen in New York late Tuesday. The dollar edged down to 77.56 yen from 77.70 yen. The news from Rome sent Wall Street into positive territory after it spent the day in the red. The Dow rose 0.84 per cent, the Nasdaq added 1.20 per cent and the S&P 500 added 1.17 per cent. Beijing said Wednesday morning that its consumer price index-a key gauge of inflation-rose 5.5 per cent year-on-year, its slowest pace since May, after more than a year of monetary tightening measures. The figure is well down from the three-year high of 6.5 per cent posted in July, and boosted hopes the government will ease up on liquidity restrictions. On oil markets New York's main contract, light sweet crude for delivery in December, gained 34 cents to $97.14 per barrel in the afternoon. Brent North Sea crude for December delivery advanced 45 cents to $115.45. At 0830 GMT gold was at $1,783.20 an ounce against $1,795.30 late Tuesday.