* Spreadbetters see European markets opening flat to higher
* China services activity reports lift Shanghai, Hong Kong shares
* Dollar in sight of 2014 peak against yen, dollar index close to overnight high
* ISM data underscores U.S. economy's expansion
By Lisa Twaronite
TOKYO, Sept 3 Upbeat Chinese services activity reports helped lift Asian shares on Wednesday, while the dollar was close to 14-month highs against a basket of major currencies after data underscored that the U.S. economy continues to gather gradual momentum.
Two surveys showed that activity in China's services sector rebounded in August, offsetting some of the recent weakness in manufacturing. Chinese stocks cheered the reports, with the Shanghai Composite Index and the Hang Seng Index rising 1 percent and 1.8 percent respectively.
Some of that cheer was expected to carry over into Europe, where spreadbetters expected Britain's FTSE 100 to open 6 points higher, or up 0.09 percent; Germany's DAX to open flat; and France's CAC 40 to open 4 points higher, or up 0.09 percent.
"This morning Chinese services PMI for August came in at 54.4, while the more reliable HSBC measure came in at 54.2, a surprise rise from the previous month, and this looks set to give us a positive start this morning," Michael Hewson, chief market analyst at CMC Markets, said in a note.
The Chinese figures came in the wake of upbeat U.S. data on Tuesday. The Institute for Supply Management said its U.S. manufacturing activity index rose to 59.0 in August, the strongest since March 2011. July construction spending was at its highest level in over 5-1/2 years.
MSCI's broadest index of Asia-Pacific shares outside Japan added 0.6 percent. It had opened lower after Wall Street marked a mixed day, though the upbeat U.S. economic data underpinned shares and limited losses.
Japan's Nikkei stock average ended up 0.4 percent, pushing up to fresh seven-month highs as it rode the weaker yen.
"I guess U.S. shares did not benefit much from the data because it could mean an earlier rate hike, but for Japanese exporters signs of a strong U.S. economy is positive," said Soichiro Monji, chief strategist at Daiwa SB Investments.
Hopes that Prime Minister Shinzo Abe's cabinet reshuffle will give fresh momentum to his growth-oriented policies also lifted sentiment.
Yasuhisa Shiozaki, 63, a proponent of an overhaul of Japan's Government Pension Investment Fund (GPIF), was selected to head the Ministry of Labour, Health and Welfare, which oversees GPIF, currently finalising plans to boost the weighting of domestic stocks in its portfolio.
The dollar edged down about 0.1 percent on the day to 104.99 yen after topping the 105 level overnight for the first time since January. Its intraday high of 105.31 yen brought its 2014 peak of 105.45 yen in sight, a break of which would bring it to levels it last visited in October 2008.
The dollar was steady against a basket of major currencies at 82.970 after rising as high as 83.039 on Tuesday, its highest since July 2013.
Rising U.S. yields lent more lustre to the dollar, as the benchmark 10-year U.S. yield posted its biggest daily rise in a month after markets were closed on Monday for Labor Day. The 10-year yield stood at 2.424 percent in late trade in Asia, up from Tuesday's U.S. close of 2.419 percent.
The euro, which touched a one-year low of $1.3110 on Tuesday on expectations that the European Central Bank will take further easing steps, was steady on the day at $1.3131.
Some investors say the ECB could unveil fresh stimulus as early as Thursday, after French President Francois Hollande and ECB President Mario Draghi agreed on Monday that deflation and weak growth were threatening the European Union's economy.
The buoyant dollar pressured prices of dollar-based commodities, though gold and oil rebounded from their deep overnight lows.
Spot gold edged up slightly to $1,267.64 an ounce after plunging 1.7 percent in the previous session as the dollar spiked higher.
Brent crude oil futures added 0.5 percent to $100.80 a barrel after they fell to their lowest level in 16 months overnight on slowing oil demand growth in China and Europe. U.S. crude also added about 0.5 percent on the day to $93.31 a barrel, after sliding $3.08 on Tuesday as ample supplies pushed U.S. prices to their lowest level since January. (Additional reporting by Hideyuki Sano in Tokyo; Editing by Eric Meijer & Shri Navaratnam)