May 29 (Bloomberg) -- Asia stocks reversed losses and oil gained on speculation China will take steps to boost growth in the world's second-largest economy. The euro traded near a 22- month low as Europe's banks seek more financial support.
The MSCI Asia Pacific Index advanced 0.2 percent as of 10:56 in Tokyo. Standard & Poor's 500 Index futures advanced 0.5 percent, while Hong Kong's Hang Seng China Enterprises Index of mainland stocks added 0.6 percent. The euro slid 0.1 percent to $1.2525 and Australia's currency fell 0.2 percent to 98.32 U.S. cents. Crude rose 0.4 percent in New York, while gold declined 0.4 percent.
China's finance ministry said it will allocate as much as 2 billion yuan ($317 million) every year to support purchases of energy-efficient cars, while the central bank auctioned 60 billion yuan of nine-month deposits at rates 1.68 percentage points lower than in June 2011. Spanish Prime Minister Mariano Rajoy called for a show of force from European authorities to help fund a bailout of the nation's third-biggest lender.
"There are expectations China will introduce more stimulus to boost the economy and there's optimism the economy will recover in the second half," said Mao Sheng, an analyst for Huaxi Securities Co. in Chengdu. "External factors such as Europe woes are still dragging on the market."
The MSCI Asia Pacific Index is headed for an 11 percent decline in May, its steepest monthly slide since October 2008. Great Wall Motor Co. advanced 3.4 percent as it was named among Chinese automakers by BNP Paribas SA that may benefit from government subsidies. Qingdao Haier Co., which makes refrigerators, gained 1.7 percent after the Ministry of Finance said China will subsidize the use of energy-saving products.
Nikkei Drops
The Nikkei 225 Stock Average fell 0.5 percent in Tokyo today after a government report showed Japan's jobless rate climbed to 4.6 percent in April from 4.5 percent in March, the first increase in three months. South Korean manufacturers' confidence fell from a nine-month high, according to the Bank of Korea.
Rajoy, repeating yesterday that he wouldn't seek a European rescue for Spain's banks, said the European Stability Mechanism should be able to recapitalize struggling lenders directly, bypassing national governments. His government is considering using public-debt securities rather than cash to fund the 19 billion-euro ($24 billion) bailout of BFA-Bankia.
The euro has fallen 5.3 percent against the dollar in May, poised for the biggest drop in eight months. Italy is scheduled to sell 3.5 billion euros ($4.4 billion) of five-year notes and 2.75 billion euros of 10-year debt tomorrow. The nation's two- year yields jumped to a four-month high of 3.945 percent yesterday.
Europe Deteriorates
"We have a very serious and deteriorating problem in Europe," said Peter Elston, the Singapore-based head of Asia- Pacific strategy at Aberdeen Asset Management, which oversees about $270 billion. "The more the crisis progresses the worse the situation becomes."
The extra yield investors demand to hold Spain's 10-year bonds instead of similar-maturity German notes soared to 5.12 percentage points yesterday, the most since 1995, according to data compiled by Bloomberg.
The cost of protecting Asian bonds from default rose, according to traders of credit-default swaps. The Markit iTraxx Asia index of 40 investment-grade borrowers outside of Japan advanced 2 basis points to 196.5, Royal Bank of Scotland Group Plc prices show. The index is headed for its highest close since May 25 and poised for the biggest monthly increase since September, according to CMA.
--Editors: Sandy Hendry, Lynn Thomasson
To contact the reporters on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net; Weiyi Lim in Singapore at wlim26@bloomberg.net
To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net
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