MSCI's broadest index of Asia Pacific shares outside Japan .MIAPJ0000PUS climbed 2.7 percent to a one-week high, recouping all of its losses from Monday, when news of the death of North Korean leader Kim Jong-il raised fears of regional instability and triggered a broad sell-off in riskier assets.

The risk-sensitive materials sector .MIAPJMT00PUS was among the best performers, rising more than 3 percent, while Taiwan .TWII led the pack with a near 5 percent rally, as the government authorized a state fund to step to support prices.

"Several supportive factors temporarily relieved concerns that the euro zone debt crisis may deteriorate, but they are merely providing a one-off floor, with a real turnaround still nowhere near in sight," said Hirokazu Yuihama, senior strategist at Daiwa Capital Markets.

European stocks were seen rising, with financial spreadbetters expecting London's FTSE .FTSE to open up 0.5 percent, Frankfurt's DAX .GDAXI up 0.8 percent, and Paris' CAC-40 .FCHI to start 0.7 percent higher.

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Euro zone package: link.reuters.com/neg32s

IFO index and GDP growth: link.reuters.com/bum65s

US housing data: link.reuters.com/jes65s

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Industrial commodities such as oil and copper extended gains after data on Tuesday showing German business morale rose sharply and a recovery in U.S. housing markets, pulling up commodities-linked currencies such as the Australian dollar, often seen as a proxy for risk appetite, which rose 0.6 percent.

Despite the improved sentiment, a bearish European growth outlook raised concerns of slowing demand for Asian exports.

"With austerity measures being imposed, growth is bound to slow or the economy will even shrink," said Suan Teck Kin, a senior economist at UOB Bank in Singapore.

U.S. crude futures rose $1 to above $98 a barrel and three-month copper on the London Metal Exchange was up 0.3 percent at $7,432 a tonne.

Gold hit a one-week high on the back of an easing dollar, which fell 0.2 percent against a basket of six major currencies .DXY. The euro added to Tuesday's 1 percent gain, rising 0.2 percent to $1.3110, inching closer to a one-week high of $1.3132 touched on Tuesday.

The Nikkei stock average .N225 rose 1.5 percent, following a rally in global and U.S. stocks on Tuesday.

EUROPE FUNDING STRAINS

Strong demand for 3- and 6-month Spanish Treasury bills on Tuesday heightened expectations for the ECB's first ever three-year tender later on Wednesday, aimed at easing interbank lending strains.

"A significant uptake is all but guaranteed and that's something that could continue this 'risk-on' (mood)," said Robert Rennie, chief currency strategist at Westpac in Sydney.

A plunge in Spanish treasury bill yields from a month ago eased fears that the borrowing costs for highly-indebted countries would remain extremely high as concerns persist over slow progress in resolving the euro zone debt crisis.

Sources reported more than 10 Italian banks, including major lenders, were looking to apply for the ECB loans by using state-guaranteed bonds as collateral.

Analysts say the long-term ECB loans will lower the cost for euro zone banks to borrow euros in the open market, but won't reduce their dollar funding costs.

The benchmark London interbank offered rate for three-month dollars rose on Tuesday to 0.56975 percent, the highest level since July 2009.

Hopes banks will use the borrowed money from the ECB to purchase high-yielding debt lowered 10-year Italian and Spanish government bond yields to 6.632 percent and 5.127 percent respectively, further away from the levels above 7 percent that were widely seen as unsustainable.

But it was more likely that the banks would use the funds to repay their own debts as they strive to get rid of bad assets and improve their balance sheets amid strong regulatory pressures to beef up their core capital.

Fading risk aversion improved sentiment in Asian credit markets, with spreads on the iTraxx Asia ex-Japan investment grade index narrowing by 7 basis points.

Bank of Japan data on Wednesday underscored how investors fled to safety in the third quarter, when European leaders faced intense market pressures to resolve the crisis. Foreign holdings of Japanese government bonds in the period posted a record year-on-year growth of 30.7 percent to 76 trillion yen ($978 billion).

(Additional reporting by Cecile Lefort in Sydney and Jane Lee in Kuala Lumpur; Editing by Alex Richardson)

• A Permanent Economic Emergency