Asian shares tread cautiously after Obama speech

TOKYO - Asian share market sentiment was cautious on Thursday after US President Barack Obama vowed to fight Islamic State militants, while the dollar pushed to fresh six-year highs against the yen.

Chinese inflation data pointing to an economy losing momentum stirred concerns but also some optimism among investors hoping for further stimulus to prop up the world's second-largest economy.

European stocks were set to inch higher, as a poll showing a majority of Scots intend to vote against independence in next week's referendum helped ease recent worries over the future of the United Kingdom.

"Despite all the uncertainty swirling around the markets at the moment, the bears aren't quite convinced that the time is right for a raid and the bulls are still clinging on for potential further upside," Jonathan Sudaria, dealer at Capital Spreads, said in a morning note.

At 0625 GMT, futures for Euro STOXX 50 STXEc1, UK's FTSE 100 FFIc1, Germany's DAX FDXc1 and for France's CAC FCEc1 were all up 0.2 per cent.

Obama told Americans in a speech late on Wednesday that he had authorised US air strikes for the first time in Syria and more attacks in Iraq in a broad escalation of a campaign against the Islamic State militant group.

He said he would hunt down Islamic State militants "wherever they are."

While overnight gains on Wall Street underpinned shares, the risk-averse mood helped push MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS down about 0.1 per cent. Hong Kong's Hang Seng Index .HSI and the Shanghai Composite Index .SSEC, however, both edged up after the China inflation data raised the possibility of more stimulus.

China's consumer prices cooled more than expected in August, up 2.0 per cent from a year earlier, missing market expectations for 2.2 per cent and down from 2.3 per cent in July. The data provides more evidence of economic slowdown but economists are divided over whether Beijing will use the extra room to announce fresh stimulus measures.

"The comfortable inflation figure will provide sufficient room for the central bank to loosen its monetary policy. The possibility of an interest rate cut cannot be ruled out in coming months," said Li Huiyong, economist at Shenyin & Wanguo Securities in Shanghai.

Japan's Nikkei stock average .N225 added 0.8 per cent to close at an eight-month high, taking solace from the weaker yen and upbeat data released before the market opened.

Confidence at big Japanese manufacturers turned positive in July-September and business conditions are expected to improve further in the following quarter, a government survey showed on Thursday.

The greenback rose to a six-year high of 107.04 yen JPY=, and was last up about 0.1 per cent on the day at 106.95 yen.

The euro EUR= edged down 0.1 per cent to $1.2900, but remained well above its 14-month low of $1.2859 hit on Tuesday.

Rising US yields gave the dollar a lift. The yield on the benchmark US 10-year note US10YT=RR stood at 2.527 per cent, not far from its US close of 2.536 per cent on Wednesday, when it rose to its highest in more than a month.

By contrast, the Bank of Japan drove a short-term interest rate below zero this week, a sign it will continue its aggressive asset purchases.

BOJ Governor Haruhiko Kuroda on Thursday said he told Prime Minister Shinzo Abe that the central bank will not hesitate to ease policy further if its 2 per cent inflation goal becomes difficult to achieve, though he also told Abe that a positive economic cycle in Japan is firmly in place.

Traders sold Treasuries to prepare for a more hawkish stance on monetary policy from the US Federal Reserve at its next policy meeting on Sept. 16-17.

Analysts said the Fed could hint at an earlier-than-expected interest rate hike on steady US jobs growth. A study from the San Francisco Fed released on Monday suggested that investors underestimated the speed at which the Fed might raise rates.

Strong Australian jobs data prompted markets to virtually price out the chance of any more interest rate cuts ahead, and helped the Aussie dollar recover from five-month lows. The Aussie rose 0.2 per cent on the day to $0.9169 AUD=D4, off Wednesday's low of $0.9113, after the country's employment surged by the most on record.

Spot gold prices XAU= edged down about 0.1 per cent to$1,247.60 an ounce, pressured by expectations of higher rates from the Fed.

US crude CLc1 inched 0.2 per cent lower to $91.52 per barrel, weighed down by rising supply, as OPEC lowered projected demand for its crude and data showed a jump in US refined product stocks.