2012.06.18 06:19:22 MARKET TALK: Indian Bonds Gain As RBI Rate Cut Expected Ahead

-- Investors cheered by Greek election result

-- Nikkei up 1.8%, S&P ASX 200 rises 1.5%, Kospi 2.1% higher

-- Euro and Australian dollar higher on the news

The outcome of the Greek election sparked a rally in risk assets in
Asia, early on Monday, as investors were cheered by the victory of
pro-bailout New Democracy party, as the results push up both
currencies and stocks, with the Nikkei reaching a one-month high.

The winning party has already started informal talks with the
country's socialist party to form a new government, with a cross-party
coalition likely to be formed by Wednesday.

New Democracy leader Antonis Samaras, has already vowed to respect the
country's commitment to a EUR173 billion ($218.6 billion) bailout
agreement with the European Union and the International Monetary Fund,
and invited all the parties that support Greece's membership of the
euro to join a national "salvation" government.

Stocks across the region climbed with Japan's Nikkei up 1.8%,
Australia's S&P ASX 200 advancing 1.5% and South Korea's Kospi pushing
2.1% higher. Singapore's Straits Times Index was up 1.1%.

Chinese stocks also started the day higher. Hong Kong's Hang Seng
Index was 1.6% higher, while the China Shanghai Composite lagged
behind other markets, gaining just 0.4%.

The conservative victory in Greece was quickly felt in the currency
markets early in Asia, as concerns that the Mediterranean country will
leave the euro zone dampened. The euro initially soared on the news,
though it pared its gains to $1.2675, compared to $1.2640 late Friday
in New York. The Australian dollar also received a boost, climbing to
$1.0096 from $1.0014 late Friday in Australia. The U.S. dollar
strengthened against the yen, to Y79.26, compared to Y78.70 late
Friday in New York.

Oil was up 1% early on Monday, to $84.90 a barrel, while gold slipped
0.3%, to $1622.70 an ounce.

"I'm surprised that there wasn't more volatility or euphoria after
what has transpired," said Paul Mackel, head of Asian currency
research at HSBC in Hong Kong. "There is still some room for
disappointment to come in. This is a small bright spot and it could
fade briefly."

Investor jitters could come back if the coalition talks fail to create
a strong government, or if attention once again turns to Spain's
financial woes.

The "worst-case scenario is that New Democracy will have to form a
minority government, which may not last the distance, leading to more
uncertainty," said Geoffrey Yu, UBS director of FX strategy in London.

Investors will also be looking to see what policymakers decide at a
series of key meetings this week -- such as a summit of G-20 leaders
in Mexico and a meeting of the Federal Reserve. Another important
point on the horizon is a summit of European leaders at the end of the
month.

"Until we find out what the European leaders deliver at the summit at
the end of the month in terms of broad progress toward a
better-functioning monetary union, the downside risks from Europe are
going to remain," said John Horner, Deutsche Bank currency strategist
in Sydney.

Markets in other regions were already readying themselves for a rise,
as stock futures climbed on Sunday night. Dow futures gained 47 points
in Sunday evening trading, though stock strategists said that the
futures market can be volatile in overnight trading.

-Write to Daniel Inman at daniel.inman@wsj.com


(END) Dow Jones Newswires

June 17, 2012 21:05 ET (01:05 GMT)