Asian shares rise to two-month highs, dollar gains on US data

TOKYO/SINGAPORE - Asian shares held near a two-month high on Friday, catching some of Wall Street's shine after upbeat US price and jobless claims data eased some concerns about the strength of the US economy.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS held steady after paring earlier gains, on track to show a rise of 1.8 per cent for the week.

Japan's Nikkei stock index .N225 was up 1 per cent, but still poised for a 0.9 per cent decline for the week.

Europe was set to open higher, with financial spreadbetters predicting Britain's FTSE 100 .FTSE will open as much as 0.9 per cent higher, and Germany's DAX .GDAXI and France's CAC 40 .FCHI to gain as much as 1 per cent.

"The recovery seems to be resuming again and, I think, has further to go as the risks regarding China seem to be receding," said Shane Oliver, head of investment strategy at AMP Capital in Sydney.

"It won't be a straight line though as expectations regarding a Fed hike will continue to wax and wane -- but ultimately get delayed into next year."

Wall Street logged solid gains overnight, after the number of Americans filing new applications for unemployment benefits fell back to a 42-year low last week. That suggested the labour market remained strong even though recent jobs data have sent mixed signals.

Also out overnight, the core consumer price index, which excludes food and energy costs, gained 0.2 per cent in September after ticking up 0.1 per cent in August, reviving some bets that the US Federal Reserve will deliver its first interest rate hike since 2006 as early as this year.

The Fed held policy steady last month, and expressed concerns that the slowing global economy, particularly in China, might pose a threat to the US economic outlook.

Rekindled rate-hike expectations lifted the dollar. The dollar index .DXY, which values the greenback against a basket of six major counterparts, was up 0.1 per cent at 94.454, but still on track for a weekly loss of about 0.4 per cent.

The greenback also gained against the yen, rising 0.3 per cent to buy 119.16 yen JPY= after pulling away from a 7-week trough of 118.065 struck overnight. The US currency was still poised to lose 0.9 per cent this week.

"It is doubtful the market tried to factor in the possibility of the Fed raising rates this year on the inflation number, but the Fed is 'data dependent' so it reacts positively to upbeat data," said Shinichiro Kadota, chief Japan forex strategist at Barclays in Tokyo.

Investors remained cautious ahead of China's latest economic growth data scheduled to be released on Monday.

Growth in the world's second-largest economy is expected to slow to 6.5 per cent in the third quarter, falling below 7 per cent for the first time since the global financial crisis.

"China's economy is growing fast - though not as fast as analysts and investors would like - and that is all you need to know," Carl Weinberg, chief economist at High Frequency Economics, said in a note to clients on Friday.

China's CSI300 .CSI300 index gained 0.6 per cent, and was set to end the week 5 per cent higher.

Markets were also awaiting September eurozone inflation data on Friday, with expectations that an early estimate of prices contracting 0.1 per cent will be confirmed.

The latest survey of over 60 economists showed eurozone inflation was expected to average 0.1 per cent this year, rise to 1.1 per cent in 2016 and further to 1.6 per cent in 2017 - still below the European Central Bank's near 2 per cent target.

The euro was steady at $1.1386 EUR=, after sliding from a 7-week peak of $1.1495 scaled the previous day after ECB governing council member Ewald Nowotny said it was "obvious" the central bank must seek more ways to stimulate the euro zone economy. The common currency was on track to end the week effectively flat.

Spot gold XAU= slipped 0.6 per cent to $1,176.60 an ounce, after jumping to $1,190.63 in the previous session, but was still headed for a weekly rise of 1.6 per cent.

Oil prices reversed overnight losses as investors bet falling US production would cut a global surplus.

US crude CLc1 was up 1.1 per cent at $46.90 a barrel, after shedding 0.6 per cent on Thursday. Brent LCOc1 added 1 per cent to $50.20.