GLOBAL MARKETS-Asian shares firm as investors square positions

Fri Nov 30, 2012 1:42am EST

* MSCI Asia ex-Japan at 9-month peak, Nikkei at 7-month high

* Month-end demand pushes dollar, euro higher vs yen

* Euro firms as euro zone borrowing costs ease

* India Q3 GDP slightly below forecast, China data eyed

* European shares likely slip

By Chikako Mogi

TOKYO, Nov 30 (Reuters) - Asian shares hit a nine-month peak on Friday, as firmer overnight global equities created an upbeat tone, but flows were largely driven by month- and year-end position-squaring, with investors taking profits on the rises and buying on dips.

European shares will likely pause, with financial spreadbetters predicting London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX will open down as much as 0.3 percent. A 0.2 percent drop in U.S. stock futures also hinted at a weaker Wall Street open.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.6 percent to its highest since March 1, and was on course for a monthly gain of 2.1 percent.

"It just seems like one of those risk-on days where investors just pile onto stocks that they think will give them the most value," said Stan Shamu, market strategist at IG Markets.

Australian shares added 0.6 percent to a fresh three-week high, aided by shares in mining and banks on firmer metals prices and a higher finish on Wall Street.

Shanghai shares were up 0.9 percent and set for their first gain this week after slumping to their lowest in nearly four years earlier in the week, while Hong Kong shares rose 0.7 percent. Indian shares moved up 0.8 percent to their highest in 19 months.

Amid unclear prospects for the U.S. budget talks and the apparently abating risk of an imminent Greece bankruptcy, investors sought trade incentives from data out of Asian countries on Friday and Saturday that could offer signals for the likely direction of global economic growth.

India's economy grew at a lower-than-expected annual 5.3 percent in the quarter ending in September, against analysts' forecast of 5.4 percent. Asia's third largest economy is still growing faster than many other major economies, but it has slowed from 6.5 percent in the 2011/12 fiscal year.

The data followed mixed reports from Japan, the world's third-largest economy, earlier in the day.

Japanese industrial output unexpectedly rose 1.8 percent in October, the first increase in four months, suggesting the negative impact of the global slowdown and a diplomatic row with China may have run its course.

But Japanese manufacturing activity contracted in November at the fastest pace in 19 months, according to a survey indicating it was hurt by falling exports, weak domestic demand and declining capital expenditure.

In South Korea, another big export-reliant economy, industrial output grew for a second month in a row in October, backing expectations for a recovery in the current quarter.

On Saturday, China will release the official manufacturing PMI for November, which is likely to show factory activity expanding at its fastest pace in seven months.

Japan's Nikkei stock average rose 0.5 percent to a seven-month closing high, posting its best month since February with a 5.8 percent gain.

Flows related to end-month demand drove the euro and the dollar higher against the yen. The dollar rose 0.3 percent to 82.36 yen, moving towards the 7-1/2-month high of 82.84 yen hit last week, while the euro jumped 0.6 percent to 107.12 yen, after hitting a seven-month high of 107.29 earlier.

"The market is subject to mood swings by investors who pay close attention to small developments in the U.S. budget talks, but as long as the yen does not rise far from current levels, we may see a slow but steady rise in the market," said Takuya Takahashi, an analyst at Daiwa Securities.

FISCAL SWINGS

Financial markets swung around on Thursday after comments by U.S. legislators dampened optimism that an agreement would be reached to avoid a series of tax hikes and spending cuts which could put the world's biggest economy back into recession.

The Speaker of the U.S. House of Representatives, John Boehner, indicated no substantive progress over the last two weeks in talks to reach a budget deal, less than 24 hours after he said he was "optimistic" about reaching a pact.

Democratic Senate Majority Leader Harry Reid struck back, saying later his party was still waiting for a reasonable proposal from the Republicans.

"We are trading day-to-day based on the running drama over the fiscal cliff, and the market doesn't look very optimistic at the moment," said Carl Larry, a derivatives broker with Atlas Commodities in Houston.

London copper rose 0.3 percent to $7,924 a tonne and spot gold inched up 0.3 percent to $1,730.36 an ounce, but prices were on track for their biggest weekly drop since the start of November with the U.S. fiscal talks hurting sentiment.

Oil fell, with U.S. crude futures down 0.3 percent to $87.81 a barrel and Brent easing 0.1 percent to $110.67.

The euro was up 0.2 percent to $1.3004, below $1.3015 on Thursday, its highest level since Oct. 31.

The euro has been supported after global lenders earlier in the week agreed to unblock more aid to debt-stricken Greece, pushing down Italy's 10-year bond yield to its lowest in two years at an auction on Thursday.

Reflecting a general caution despite rising equities, Asian credit markets were lacklustre, keeping the spreads on the iTraxx Asia ex-Japan investment-grade index little changed.

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