Asian equities extended a global rally amid optimism Greece can strike a deal with creditors, while the euro retreated on speculation any resolution would make it easier for U.S. policy makers to raise interest rates. Chinese shares fluctuated.
The MSCI Asia Pacific Index rose 0.8 percent by 2:08 p.m. in Tokyo, headed for its highest close since June 3 as Japan's Topix index climbed a third day. U.S. index futures gained 0.3 percent. The euro slid 0.6 percent. Yields on 10-year bonds from Japan to Australia added at least two basis points. The Shanghai Composite Index, which plunged 13 percent last week, was little changed after falling as much as 4.8 percent. Copper and nickel advanced more than 1.6 percent in London.
China's markets resume after a holiday, with a preliminary gauge of factory activity showing a smaller-than-estimated contraction. European leaders gave Greece 48 hours to reach an agreement that satisfies creditors. A package of proposals from Athens was a "certain step forward," but didn't go far enough, German Chancellor Angela Merkel said.
"Markets are rallying on optimism the debt deadlock on Greece will soon be resolved," said Mixo Das, a strategist at Nomura Holdings Inc. in Singapore. "There's bound to be further consolidation in Chinese equities as valuations are still high. With data starting to show some signs of improvement, there's less pressure for the PBOC to ease monetary policy."
The euro bought $ 1.1270. Higher-yielding European debt rallied Monday, with Italian bonds climbing the most in more than a year, while Spain's 10-year rates fell 16 basis points and German bunds slipped.
The Bloomberg Dollar Spot Index added 0.4 percent as Treasury rates climbed a second day, extending Monday's 12 basis-point surge that was the biggest jump in six weeks. Ten-year Treasuries yield 95 basis points more than the average for other Group-of-Seven countries.
Euro-area finance ministers will meet Wednesday to prepare the ground for a second, scheduled summit of European Union leaders to begin Thursday. European Commission President Jean-Claude Juncker said he is "convinced" a final agreement will be forged this week.
Negotiations with creditors will continue over the coming 48 hours to achieve a "total and viable solution" to the funding crisis, Greek Prime Minister Alexis Tsipras told reporters in the early hours of Tuesday in Brussels. A June 30 deadline for Greece to make payments to European creditors and the International Monetary Fund is bearing down on the talks.
Shanghai Slide
The Shanghai equity gauge recovered after taking its three-day drop to more than 12 percent, at one point heading for the biggest such retreat since December 1996. The Chinese stock correction doesn't change the bull market outlook and could help ensure more considered gains in the long term, according to a commentary featured on the front page of the China Securities Journal.
A preliminary China manufacturing purchasing managers index from HSBC Holdings Plc and Markit Economics came in at 49.6 for June, versus economists' projection of 49.4. A reading of 50 marks the border between expansion and contraction.
The Hang Seng China Enterprises Index, which also entered a correction last week, climbed 1.6 percent and the Hang Seng Index advanced 0.7 percent.
Most sovereign bonds fell as the progress in Greek talks fueled demand for riskier assets. Japanese debt maturing in a decade yielded 0.455 percent, up three basis points.
Yields on Australian 10-year bonds jumped nine basis points, or 0.09 percentage point, to 3.05 percent. Similar-maturity New Zealand notes climbed seven basis points to 3.69 percent, halting a seven-day retreat.
U.S. Stocks
The S&P 500 rose as much as 0.9 percent to within a point of its May 21 record, before paring gains to end the day up 0.6 percent. The index is coming off its best week since April, climbing 0.8 percent after Federal Reserve Chair Janet Yellen signaled the central bank will take a gradual approach to raising U.S. interest rates.
Data Monday showed previously owned U.S. homes sold at the fastest pace since November 2009 in May, adding to evidence the economy is strong enough to withstand the first rate increase since 2006. Three rounds of Fed bond purchases and near-zero interest rates helped propel the S&P 500 higher by more than 200 percent during the six-year bull market.
Crop prices climbed as rains hurt production in the U.S. Midwest. Soybean futures in Chicago advanced for the second day, rising as much as 0.9 percent to $ 9.675 a bushel, the highest level in six weeks. Corn increased 1.1 percent and wheat added 1.2 percent.
Wet weather kept farmers out of U.S. fields last week, with the pace of soybean plantings and winter-wheat harvesting at the slowest in almost two decades.
Ninety percent of the U.S. soybean crop was planted as of June 21, the slowest pace for this time of year since 1996, U.S. Department of Agriculture Data show. Nineteen percent of the winter-wheat crop was harvested, the lowest since 1997. The U.S. is the largest exporter of both crops.
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