Asian stocks gain on US debt deal hopes

Asian shares rose on Wednesday as indications of progress on a US budget-reduction deal boosted investor confidence while encouraging quarterly numbers from Apple Inc and International Business Machines helped Asia's beaten-down tech sector gain for a second day.

With just two weeks left until the US government runs out of money to pay bills, President Barack Obama seized on a plan by a bipartisan group of senators that could revive stalled US debt talks and the prospect of a long-term deficit reduction deal to avert a default.

The euro which had risen earlier as Italian and Spanish yields fell, gave up gains on increasing doubts that Thursday's euro zone summit will offer a long-term solution to the debt crisis.

Asian tech stocks, this year's worst performing regional sector, got a lift as corporate earnings from IBM and iPhone maker Apple which surpassed analyst forecasts.

They are still by far the worst performing sector with the MSCI index of technology firms in Asia ex-Japan down 7.6% this year, followed by industrials which are down only 2.5%.

Benchmarks in Japan, South Korea and Taiwan rose as makers of tablet and smart phone components posted strong gains.

"Thanks to Apple, its suppliers would be able to continue to grow substantially in Q3, even into next year," said Oscar Chung, who manages about USD 448 million for Capital Securities Investment Trust in Taiwan.

The MSCI Asia ex-Japan index was up 1.2%. Samsung Electronics, which plans to introduce an upgraded version of its own Galaxy tablet in the Korean markets on Wednesday, jumped 3.5%.

Analysts from Societe Generale said in a note that over the past month Asia's tech sector had clearly lagged peers in the US and Europe, suggesting there was more room for a rebound in regional names especially if Intel Corp results, expected later on Wednesday, are not as bad as feared.

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EYES ON EURO ZONE SUMMIT

The euro was flat as German Chancellor Angela Merkel doused expectations for Thursday's emergency euro zone summit, saying expectations for a single, final solution to the Greek crisis was unrealistic.

"Further steps will be necessary and not just one spectacular event which solves everything," Merkel told reporters on Tuesday.

The euro was trading little changed around USD 1.4158 against the dollar after a 0.3% gain on Tuesday, having pulled away from a four-month low near USD 1.3838 hit last week.

"There hasn't been any progress and the euro just seems to be moving this way and that within a range," said Tsutomu Soma, senior manager for Okasan Securities' foreign securities department in Tokyo.

"I don't think anyone can buy the euro wholeheartedly," he said, adding that the euro may struggle to rise above resistance in the USD 1.4250 to USD 1.4300 area in the near term.

Gold snapped an unprecedented 11-day winning streak, shedding over 1% overnight as safe-haven interest ebbed. Spot gold which hit a record USD 1,609.51 an ounce on Tuesday was trading around USD 1,587.1 an ounce.

NYMEX crude oil rose above USD 98 a barrel as crude inventories in the US tightened and industrialized nations looked unlikely to release more emergency reserves.