Koji Sasahara, Associated Press
BEIJING — Asian stocks were mostly higher Tuesday as traders watched for a possible deal to cut Greece's debts and Japanese factory output rebounded.
Tokyo's Nikkei 225 rose 0.3 percent to 8,817.9 after data showed December industrial activity rose 4 percent over the previous month. Hong Kong's Hang Seng gained 0.7 percent to 20,303.9 and Seoul's Kospi was up 0.8 percent at 1,955.2.
Traders watched Europe, a major export market, following reports Greece and its creditors were close to a deal to cut its debts. Also Monday, European leaders agreed on a new treaty meant to stop overspending and put an end to the region's crippling debt woes.
"Everyone is watching the European summit and how the Greek debt crisis comes out," said Jackson Wong at Tanrich Securities in Hong Kong. "The general atmosphere is to play a wait-and-see game."
China's benchmark Shanghai Composite Index was flat at 2,281.4 ahead of Wednesday's release of a key manufacturing index. Investors are hoping for a loosening of credit curbs or other measures to boost growth if it shows activity is slowing amid lackluster global demand for Chinese goods.
Benchmarks in Taiwan and Indonesia rose while Singapore, Malaysia and New Zealand fell.
European markets tumbled Monday on concerns Greece's financial problems might not be solved even if creditors agree to cancel part of its debt.
Under a tentative agreement, investors holding 206 billion euros ($272 billion) in Greek bonds would exchange them for bonds with half the face value. The replacement bonds would have a longer maturity and pay a lower interest rate. When the bonds mature, Greece would have to pay its bondholders only 103 billion euros.
France's CAC-40 shed 1.6 percent while Britain's FTSE 100 and Germany's DAX both lost 1 percent.
Wall Street fell in early trading but Asian investors were encouraged after the Dow Jones industrial average recovered most of its losses to close down just 0.1 percent. The Standard & Poor's 500 lost 0.8 percent.
Borrowing costs for European countries with the heaviest debt burdens shot higher. The two-year interest rate for Portugal's government debt jumped to 21 percent after trading around 14 percent last week.
Portugal may become the next country "where default is a real possibility," said Martin Hennecke of Tyche Group in Hong Kong.
"The euro zone crisis is far from being fixed at all. Italy and Spain are effectively bankrupt as well," Hennecke said. "For Asia, that means there is huge uncertainty in terms of export markets."
The treaty agreed to Monday by all European Union governments except Britain and the Czech Republic includes strict debt brakes and is aimed at making it harder for violators to escape sanctions. The 17 countries in the eurozone hope the tighter rules will restore confidence in their joint currency.
The agreement comes as richer countries such as Germany are losing patience with giving Athens loans, saying the Greek government is not carrying out reforms and spending cuts fast enough. A German official proposed having an EU monitor oversee Greek spending but that idea was quickly rejected at Monday's meeting in Brussels.
Benchmark oil for March delivery gained 37 cents to $99.39 per barrel in electronic trading on the New York Mercantile Exchange.
In currencies, the euro rose to $1.319 from $1.3114 late Monday in New York. The dollar held steady at 76.25 yen.
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