People stand in front of an electronic board showing a China stocks advertisement outside a brokerage in Tokyo, Japan. Picture: REUTERS/TORU HANAI
People stand in front of an electronic board showing a China stocks advertisement outside a brokerage in Tokyo, Japan. Picture: REUTERS/TORU HANAI

Sydney — Asian shares reversed early losses on Wednesday, while the euro rebounded from six-week lows on reports Italy will cut its budget deficit at a faster pace than expected, raising hope that Rome can stave off a problematic debt blow-out.

Italy will reduce its budget deficit to 2% of gross domestic product (GDP) by 2020, from the earlier announced 2.4%, local newspaper Corriere Della Sera reported.

The pledge boosted the euro.

The single currency has been rattled by concern that a significant increase in the Italian budget will deepen the country's debt and deficit problems, and by extension those of the European Union.

The euro jumped 0.3% on the news to $1.1585, snapping five straight days of losses that had pushed it to a six-week trough of $1.1506.

MSCI's broadest index of Asia-Pacific shares outside Japan climbed 0.2% with Hong Kong's Hang Seng index up 0.5% and Singapore shares adding 0.9%.

Japan's Nikkei pared early losses and was last a shade weaker while Australian shares gained 0.3%.

E-Minis for the S&P 500 and the Dow Jones industrial average also reversed losses, gaining 0.2% each.

China's financial markets are closed for holidays this week and will resume trade on October 8. South Korea was also closed for a public holiday on Wednesday.

"The big market mover in the past 24 hours has been Italy and the concern about its debt, so the latest news is being considered a much better outcome than was priced into the market," said Kyle Roda, a Melbourne-based analyst at IG.

"The news has prompted some buying, we're seeing a bit of a relief rally."

Globally, risk appetite was hit after EU officials expressed concerns about Italy's budget plan, which would widen the deficit significantly.

Trade war 

But sentiment remained generally jittery even as a new US-Mexico-Canada trade agreement appeared to ease global trade tensions. A controversial clause in the trilateral pact put the focus back on the China-US tariff dispute.

Chinese markets have taken a hammering this year as investors fretted the trade dispute could put a significant dent on growth.

"Many deadlines have come and gone and the trade war continues," said Ethan Harris, global economist at Bank of America-Merrill Lynch.

"However, in this case we have marked our calendar for November 30," the date when US President Donald Trump and his Mexican and Canadian counterparts are likely to sign the new trilateral trade pact.

"It is also the day Trump and Chinese President Xi Jinping are attending the G-20 meetings. (We) continue to believe that is the first plausible date for serious negotiations."

The dollar's index, which measures the greenback against a basket of major currencies, was last at 95.314, pulling back from six-week highs of 95.744 set on Tuesday.

Gold traded near its highest level in more than a week as investors sought refuge in the safe haven after equity markets weakened. Spot gold was last at $1,207.19 an ounce after adding 1.3% to $1,208.23 an ounce overnight.

Oil prices held close to four-year highs on supply worries due to Washington's sanctions on Iran.

Brent added 5c to $84.85 a barrel, not far from a four-year high of $85.45 touched earlier in the week. US crude futures inched 1c up to $75.24 a barrel, after earlier touching a four-year high of $75.91.

Some analysts say fears about the supply of oil may be overdone.

"Even assuming that Iranian output will fall by as much as it did during the far more comprehensive sanctions imposed between 2011 and 2014 … we think that likely increases elsewhere will be enough to make up the difference," Capital Economics said in a note.

Reuters