TOKYO: Asian shares, the euro and commodities rebounded on Tuesday, with stocks holding a touch above 2012 lows, as investors looked to European policymakers and the wider G7 to take decisive action to address the worsening euro zone crisis.

European shares were likely to extend their gains modestly, having firmed the day before on expectations for fresh steps to contain the region's debt problems. Spreadbetters tipped major European markets to rise by as much as 0.4 per cent. US stock futures were also up 0.4 per cent.

Finance ministers of the Group of Seven leading industrialized powers will hold emergency talks by phone later on Tuesday, illustrating their heightening alarm about strains in the 17-nation euro area.

The move prompted traders to pare back their huge bets against the euro, which rose 0.2 per cent to $1.2526, off last week's trough of $1.2288, its lowest in nearly two years.

Investors turned less pessimistic and looked for bargains in battered assets ahead of other two major events this week: the European Central Bank's policy decision on Wednesday and US

Fed Chairman Ben Bernanke's congressional testimony on Thursday.

MSCI's broadest index of Asia-Pacific shares outside Japan climbed 1.2 per cent, snapping a four-day losing streak. It tumbled 2 per cent during Monday's sell-off, which had been sparked by weak US jobs data and bleak surveys of Chinese and European factory activity last week.

“Investors are pinning their hopes on the G7 and the ECB meetings and have taken on a bit of encouragement as well from signs of a German policy shift,” said Ham Sung-sik, an analyst at Daishin Securities in Seoul.

“But we still need to see some tangible results to say a bottom has been carved out in the market.”

The MSCI pan-Asian index's materials sector led the gains, lifting resource-heavy Australian equities 1.4 per cent.

Japan's Nikkei average of major stocks also rose 0.8 per cent and Tokyo's broader Topix index jumped 1.6 per cent after the latter hit a 28-year low on Monday.

Shanghai copper bounced off its 2012 lows with a 1.5 per cent jump on Tuesday, while US crude rose 0.9 per cent to $84.75 a barrel, off its lowest in nearly eight months hit on Monday. Brent rose 0.4 per cent to $99.27.

But some industry experts saw the rebound in oil as only temporary, citing weaker demand in response to a slowing global economy, as well as easing international political tensions.

“Global demand is softening, we have got recessionary elements in Europe, a small slowdown in Asia Pacific,” Royal Dutch Shell CEO Peter Voser told Reuters in an interview on the sidelines of the World Gas Conference in Malaysia's capital.

The benchmark Thomson Reuters-Jefferies CRB index, a global commodities benchmark, settled up 0.6 per cent on Monday for its sharpest gain since April 27, after dropping almost 11 per cent in May, the second-largest monthly decline since 2008.

GOLD GAINS ON WEAKER DOLLAR

The Australian dollar, which is closely linked to risk appetite, hit a session high of $0.9790, after the Reserve Bank of Australia cut interest rates by 25 basis points, citing modest domestic growth and a more uncertain global environment.

The yen traded off its peaks against the dollar and the euro, holding steady at 78.33 to the US dollar and down 0.3 per cent against the single currency at 98.15 yen.

A 0.2 per cent drop in the dollar index, measured against a basket of key currencies, underpinned spot gold, which edged up 0.1 per cent to $1,619.56 an ounce.

Bullion has been pressured recently by investors cashing in to cover losses as assets crashed across the board.

“The market sentiment has turned a bit more bullish since we broke above the key $1,600 level on Friday, as investors may favour gold as a safe haven again after the bad US data last week,” said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong.

A recovery in riskier markets reduced the cost of insuring against corporate and sovereign defaults in Asia, narrowing the spread on the iTraxx Asia ex-Japan investment-grade index by 5 basis points.

The previous session's heavy selling, which started in Europe and North America on Friday and continued into Asia on Monday, has spurred hopes for more monetary stimulus, both from the ECB and a possible third round of quantitative easing from the Federal Reserve, to help stabilise markets.