By Akiko Ikeda and Masaki Kondo June 3 (Bloomberg) -- Asian stocks rallied the most in six months, oil gained and the risk of corporate bond defaults fell as rising sales of U.S. homes and cars bolstered confidence in the global economy. The Japanese yen weakened for a second day. The MSCI Asia Pacific Index advanced 2.8 percent to 113.87 as of 3:15 p.m. in Tokyo, the most since Nov. 30. Oil for July delivery climbed 1.7 percent to $74.12 a barrel after an industry report showed a decline in U.S. crude inventories. Futures on the Standard & Poor’s 500 Index rose 0.7 percent today and those for the Euro Stoxx 50 jumped 2.3 percent. Asian stocks are recovering from the biggest drop in 19 months in May, as reports in the U.S. showed a recovery in consumer demand, ahead of data today that may show an improving job market. Japanese investors sought higher-yielding assets in the week ended May 28, buying a net 1.17 trillion yen ($12.7 billion) in overseas debt during the week ended May 28 and 276 billion yen in stocks abroad, Ministry of Finance data showed. “The data provides assurance that the U.S. economy is improving and that’s boosting investor sentiment,” said Yoshihiro Ito, a senior strategist at Okasan Asset Management Co., which oversees about $10 billion in Tokyo. “Technical indicators show that the recent declines are excessive and investors are hunting for bargains.” The MSCI Asia Pacific Index’s 14-day relative strength index, which measures how rapidly prices have risen or fallen, closed at 33 yesterday, near the 30 threshold some investors use as a signal to buy. The stock index dropped 10 percent in May. Canon, Nissan Japan’s Nikkei 225 Stock Average rallied 3 percent, Hong Kong’s Hang Seng Index jumped 1.8 percent, South Korea’s Kospi index climbed 1.7 percent and Taiwan’s 3Taiex index advanced 2.2 percent. An index of pending U.S. home resales rose 6 percent in April, the National Association of Realtors said, exceeding the median forecast of economists surveyed by Bloomberg News. U.S. companies created 70,000 jobs in May, according to a separate survey before the ADP Employer Services report today. The S&P 500 surged 2.6 percent, rebounding from a near three-month low. HSBC Holdings Plc, Europe’s biggest bank by market value, gained 2.1 percent after a government report showed Hong Kong’s home sales rose 8.7 percent in May from a year earlier. Wells Fargo & Co. advanced 3.4 percent yesterday in the U.S. after saying consumer credit began to improve last November. “We’re buying selected stocks,” said Terrace Chum, who helps manage $6 billion at MFC Global Investment Management in Hong Kong. “We’re still waiting for clearer signals whether there are still problems in Europe and we’re waiting to see whether the growth slowdown in China will be more serious.” Consumer Demand Canon Inc., a camera maker that gets about 80 percent of its revenue outside Japan, gained 3.4 percent. Taiwan’s Hon Hai Precision Industry Co., which assembles Apple Inc.’s iPhones, climbed 4.6 percent. Nissan Motor Co., Japan’s third-largest automaker, rose 4.8 percent after reporting a 24 percent increase in U.S. car sales in May from a year earlier. Toyota Motor Corp., the world’s biggest carmaker, climbed 3.6 percent after posting a 6.7 percent sales gain. Kia Motors Corp., South Korea’s second- biggest automaker, advanced 3.2 percent after U.S. sales rose 21 percent last month. South Korea’s 2010 trade surplus will probably exceed the government’s earlier estimate of $20 billion as exports rise more than 20 percent, the Knowledge Economy Ministry said. Australia’s trade balance unexpectedly swung to an A$134 million surplus in April on coal and iron ore exports, government data showed. Copper for delivery in three months on the London Metal Exchange climbed as much as 1.4 percent to $6,760 a metric ton on global growth optimism. Nickel advanced as much as 2.8 percent to $20,200. Yen Weakened The yen weakened against all of its major counterparts as the search for a new prime minister in Japan and signs the U.S. economy is gaining traction tilted demand toward higher-yielding assets. The currency weakened 0.8 percent to 113.73 per euro and 0.2 percent to 92.345 per dollar, after dropping 1.3 percent yesterday. The euro rallied 0.6 percent to $1.2318. It touched $1.2111 on June 1, the lowest level since April 2006. “Once investors shift their attention back to the fundamentals, which are still signaling solid improvement, there is no strong reason to buy the yen,” said Morio Okayasu, chief analyst in Tokyo at FOREX.com Japan Co. “Underlying demand for higher-yielding assets outside Japan remains strong.” The yen also depreciated on speculation Prime Minister Yukio Hatoyama will be succeeded by Finance Minister Naoto Kan, who has called for the Bank of Japan to do more to fight deflation. “Kan, or whoever the successor is, won’t try to talk up the value of the yen,” said Kazumasa Yamaoka, a senior analyst in Tokyo at GCI Capital Co., an investment advisory company. Political Upheaval The South Korean won rose 1.5 percent to 1,198.55 per dollar. JPMorgan Chase & Co. yesterday raised the nation’s equities to “overweight” and said the won is one of the “most undervalued” emerging-market currencies. The cost of insuring Asia-Pacific bonds from non-payment dropped, according to traders of credit-default swaps. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan declined 9 basis points to 136, according to Royal Bank of Scotland Group Plc. To contact the reporters on this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net; Akiko Ikeda in Tokyo at iakiko@bloomberg.net.

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