European shares were seen higher, with spreadbetters predicting major European markets to open as much as 1.5 per cent higher. U.S. stock futures were up 0.6 per cent.
The European Central Bank is due to announce the outcome of its latest policy meeting at 1245 GMT, although the market consensus is that it will hold its key interest rate unchanged at 1 per cent.
Data showing the Australian economy grew a surprisingly strong 1.3 per cent in the first quarter lifted the Australian dollar 1 per cent to $0.9840 and pushed shares there up 0.2 per cent from negative territory.
Commodities rose as the dollar weakened on the back of the euro's recovery and the rebound in the Aussie, typically linked to risk appetite.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.2 per cent, while Tuesday's data showing the U.S. services sector improved in May underpinned Japan's Nikkei average, which jumped 1.6 per cent.
"Asian equities markets are moving on various expectations but the strongest driver is growing hopes for monetary policy stimulus to fend off contagion from Europe," said Hirokazu Yuihama, a senior strategist at Daiwa Securities in Tokyo.
Spain sent a distress signal on Tuesday about the impact of the country's banking crisis on government borrowing, saying Madrid was losing access to funding from markets at current rates and urged Europe to help revive its troubled banks.
However, sources told Reuters that no decisions can be made on how to help Madrid recapitalise its banks until the first phase of an independent banking audit is completed this month.
Market players are now eyeing central bank action to help support fragile global growth and stabilise markets, after finance ministers from the Group of Seven major economies held inconclusive emergency talks on the euro zone on Tuesday.
The move by the Reserve Bank of Australia on Tuesday to cut interest rates for a second month running by 25 basis points to 3.5 per cent, partly due to a darkening global outlook, fed expectations that others such as South Korea, which kept rates steady at 3.25 per cent for the 11th consecutive month in May, could follow suit, Daiwa Securities' Yuihama said.
"Such expectations are prompting investors to look for bargains as valuations for Asian equities now suggest they are more than oversold to levels that reflect an extremely pessimistic scenario," he said.
He took particular note of Shanghai shares and the China Enterprises index of top Hong Kong-listed mainland firms, or H-shares. According to Thomsonreuters I/B/E/S, the price to earnings ratio of H-shares stood at 6.6 times against a long-run average of 11.5, while the P/E of Shanghai shares was at 9.5 times, compared to its long-term average of 16.1.
HOPES OF POLICY ACTION
Prospects were less than certain for global central bank policy action to revive the economic recovery, ahead of the European Central Bank's ECB monthly rate-setting meeting later on Wednesday, and U.S. Federal Reserve Chairman Ben Bernanke's testimony before a congressional panel on Thursday.
"The consensus is for the European Central Bank to keep the benchmark rate unchanged ... perhaps it will look to keep its powder dry until more is known from both the Greek elections and then any subsequent policy response from governments, something that the ECB is keen to promote," said Chris Weston, institutional trader at IG Markets.
James Bullard, president of the St. Louis Federal Reserve Bank, and Dallas Fed President Richard Fisher on Tuesday suggested the U.S. central bank was not preparing to ease monetary policy at a meeting later this month, saying the economic outlook had not deteriorated to the point where action was warranted.
The euro added 0.4 per cent to $1.2496, off Tuesday's one-week peak of $1.2543 but still above a near two-year trough of $1.2288 hit on Friday.
The euro was likely to be capped below $1.25, with Tuesday's purchasing managers indexes showing the euro area's vast private economy shrank in May at the fastest pace in nearly three years, with company order books collapsing, suggesting even Germany is no longer immune to the crisis.
Sentiment was hardly helped by Moody's Investors Service downgrading the credit ratings of several German banks on Wednesday, citing increased risk of further shocks emanating from the euro zone debt crisis and their limited loss-absorption capacity.
The yen eased against the dollar to 78.84 after Japan on Tuesday signalled it was prepared to intervene to curb its currency. The Japanese currency even fell against the euro and traded down 0.6 per cent at 98.53 yen on Wednesday.
The euro's rise and the dollar's broad weakness supported oil and gold prices. Spot gold rose 0.6 per cent to $1,626.26 an ounce, approaching a one-month peak hit last week.
U.S. crude futures rose 0.7 per cent to $84.87 a barrel and Brent gained 0.5 per cent to $99.30 a barrel.
The cost of insuring against corporate and sovereign defaults in Asia eased on Wednesday, narrowing the spread on the iTraxx Asia ex-Japan investment-grade index by 6 basis points.
Copyright Thomson Reuters 2012