LONDON (Reuters) - The Japanese yen weakened toward 100 to the dollar on Monday and shares rose after the G20 accepted Japan's bold stimulus policies, helping to counter the gloom over the global growth outlook.
U.S. stock index futures also pointed to a higher open on Wall Street, where the focus is on quarterly corporate results and whether these suggest further weakness ahead.
In its communique after a two-day meeting, the G20 avoided any direct criticism of Japan's policies and appeared to accept the need to reflate the world's third largest economy as part of efforts to invigorate a shaky global economic recovery.
Major world central banks have been holding interest rates at rock-bottom levels since 2008 while pumping over $6 trillion into their banking systems through loans and asset-purchase operations with only modest success so far.
"The real issue of deflation in Japan has to be tackled before we can have a genuine global recovery," said James Bevan, chief investment Officer at CCLA Investment Management.
The G20's actions removed any remaining obstacles to further yen weakness, setting up a test of the symbolic 100 yen to the dollar level and boosting demand for Japanese stocks.
"Japan not only escaped criticism, but on the contrary won praise as a country that was fulfilling its global obligations," said Marshall Gittler, head of global FX strategy at IronFX.
"That is in effect the green light for the BOJ's easing, which we expect will push USD/JPY through the magic 100 number in the not-too-distant future - perhaps as early as today."
The dollar was at 99.75 yen, off an intraday high of 99.90 and just below a four-year peak of 99.95 hit on April 11.
The euro also rose against the yen, reaching 130.70 from around 129.98 late on Friday, near a three-year peak of 131.10 set earlier this month.
Against the dollar, the euro eased slightly to $1.3040 after touching a session high of $1.3130 on Friday. The euro, which failed to break above $1.32 recently, has been stuck in a $1.30/32 range for the past week.
European stock markets were on course for a second straight daily gain, helped up by a jump in Italy's blue-chip index after the country's long-running political crisis moved a step closer to resolution.
Milan's FTSE MIB index gained as much as 2 percent on hopes the re-election of Italy's 87-year old president Giorgio Napolitano would see a new government emerge within days, ending two months of political stalemate.
The broad FTSEurofirst 300 index was up 0.8 percent at 1,162 points at midday, while Paris's CAC-40 and Frankfurt's DAX were about 0.75 percent higher.
MSCI's world equity index gained 0.25 percent, in part due to the better tone seen earlier in Asia when Japan's Nikkei hit its highest level in five years as the yen weakened after the G20 statement.
In the debt market Italian 10-year bond yields dropped to near their lowest levels in two years at 4.08 percent in response to the political resolution, while safe-haven equivalent German bonds were steady at 1.24 percent.
Traders had not expected a big move in German bonds as the market is awaiting key surveys on European purchasing managers' activity in April, due on Tuesday. These are likely to show the euro zone remains mired in recession, increasing the chance of a rate cut by the European Central bank.
In the commodity markets gold rebounded from its sharp sell-off last week, though sentiment remained shaky after the precious metal posted its biggest-ever daily loss in dollar terms last Monday.
The spot gold price rose more than 2 percent at one point to a high of $1,436.70 an ounce, well above the two-year low of $1,321.35 touched last week.
U.S. gold futures hit a high of 1,434.50 an ounce, up 2.8 percent from the previous close of 1,395.60.
Oil also rebounded, extending its gains into a third day as low prices brought buyers back into the market following sharp drops earlier in the month due to the worries about the growth outlook and its impact on demand.
Brent has lost 10 percent since the start of April as growth in the United States and China - the world's two largest oil consumers - slowed while recession in Europe deepened.
June Brent crude rose $1 a barrel to $100.65, while U.S. crude for June delivery gained 65 cents to $88.65 a barrel after a 3.6 percent loss last week.
"This is more bargain-hunting than anything else. People are getting back in the market, but that may not be sustained depending on the (economic) data this week," said Simon Wardell, an analyst at Global Insight.
(Additional reporting by Anooja Debnath. Editing by Anna Willard and Will Waterman)