* MSCI Asia ex-Japan up 0.7 pct, Nikkei at 1-week high
* Aussie hits 5-wk high vs dollar, safe-haven yen retreats
* U.S. nonfarm payrolls due 1230 GMT
* Euro zone manufacturing data due Friday
* European shares likely to change little
By Chikako Mogi
TOKYO, Nov 2 Asian shares advanced to their
highest in nearly two weeks with risk appetite returning on
signs that a trend of global recovery is stabilising,
particularly in the United States and China.
Positive U.S. private sector employment and consumer
confidence reports drove the dollar higher, while the yen
retreated as demand for safe-haven assets weakened.
Ahead of a U.S. nonfarm payrolls due at 1230 GMT, a key
market event, U.S. stock futures were down 0.1 percent,
suggesting a cautious Wall Street start.
European shares were also seen subdued, with financial
spreadbetters expecting London's FTSE 100, Paris's
CAC-40 and Frankfurt's DAX to open little
The MSCI index of Asia-Pacific shares outside Japan
climbed 0.7 percent to its highest since Oct.
23, and was set for a weekly increase of 1.3 percent.
Factory activity picked up moderately in China, which has
spawned global growth in recent years, and business surveys
showed other big Asian economies were slowly recovering as well,
while there were mixed signals about the health of U.S.
Resources-reliant Australian shares closed up 0.1
percent, as caution before the U.S. jobs data trimmed earlier
rallies rooted in improving U.S. and Chinese economic
conditions. The risk-sensitive Australian dollar earlier rose to
a five-week high of $1.0420.
"Downside risks are lessening," said Toru Yamamoto, chief
strategist at Daiwa Securities.
Thanks to the developments in the U.S. and China, he added,
global conditions appear to be getting better, and that "points
to a nuanced improvement in sentiment."
Hong Kong's Hang Seng Index outperformed Asian peers
with a 1.4 percent jump to a 15-month high, buoyed by strength
in Chinese financials and growth-sensitive sectors.
"We could see more gains from here because funds will need
to chase performance as the year draws to a close," said Alan
Lam, Greater China equity analyst. "H-shares are going to lead
the move up, since they are still lagging on the year."
The Hong Kong Monetary Authority stepped into the currency
market during New York's Thursday trading hours to combat the
local currency's persistent move to the strong end of its
trading range. Hong Kong's de facto central bank is seeking to
counter ample funds unleashed by global quantitative easing
chasing stocks, property and other assets in the former British
More capital inflows into Hong Kong are expected and could
be a source for further strength for a year-end rally after the
party congress that starts next week might alleviate some
political uncertainty in China.
Japan's Nikkei average ended 1.2 percent up at a
one-week high as a weaker yen underpinned demand for shares.
The dollar inched up 0.2 percent against the yen to 80.29
, nearing a four-month high of 80.38 hit last week.
U.S. employers likely added 125,000 jobs in October and the
jobless rate likely ticked up to 7.9 percent from September's
Payrolls processor ADP reported on Thursday that U.S.
companies added jobs in October at the fastest pace in eight
months while new claims for jobless benefits fell last week.
US ELECTIONS NEXT FOCUS
Positive economic news could affect the outcome of the Nov.
6 elections while easing pressure for more monetary easing,
pushing up Treasury yields and lifting the dollar.
"Market impact from the U.S. jobs data may in the end be
offset by the outcome of the presidential election," said
A rise in equities in the wake of a solid jobs report may be
countered if President Barack Obama wins, as his re-election
will be perceived as negative for equities, while weakness in
stocks due to soft data could be recovered if Republican Mitt
Romney wins, as markets see him as stock-friendly, Yamamoto
Morgan Stanley, in a research note, said "Asian economic
indicators are consistent with a risk-on strategy, but we remain
"The outcome of the U.S. presidential election is a close
call, leaving markets concerned about whether the newly elected
president will have the political capability to deal with the
fiscal cliff," undermining the recent economic rebound, it said.
After the U.S. election, Congress must deal with that
"fiscal cliff" - up to $600 billion in expiring tax cuts and
spending reductions that are set to kick in next year - which
threatens to hurt the U.S. economy.
The euro remained in the recent $1.28-$1.32 range, but
dipped below $1.29 as spot gold slipped 0.4
percent to $1,707.74 an ounce after a fall below key support
levels accelerated selling in bullion amid wariness before the
U.S. payrolls data.
Reports on manufacturing activity in major euro zone
countries, due on Friday, are expected to show continued
U.S. crude fell 0.4 percent to $86.71 a barrel and
Brent was down 0.2 percent to $107.96.
Asian credit markets recovered, tightening the spread on the
iTraxx Asia ex-Japan investment-grade index by 4