* MSCI Asia ex-Japan up 0.5 pct, hits 16-month high
* Asian shares set for third weekly gain
* Euro hovers near 1-week low vs dollar
* U.S. Nov nonfarm payrolls due at 1330 GMT
* European shares likely gain modestly
By Chikako Mogi
TOKYO, Dec 7 Asian shares touched fresh 16-month
highs on Friday as investors awaited U.S. nonfarm payrolls data
due later in the day, with sentiment underpinned by signs that
China's economy is stabilising.
European shares will likely gain modestly, with financial
spreadbetters predicting London's FTSE 100, Paris's
CAC-40 and Frankfurt's DAX to open as much as
0.4 percent higher. A 0.1 percent rise in U.S. stock futures
hinted at a steady Wall Street open.
MSCI's broadest index of Asia-Pacific shares outside Japan
rose 0.5 percent, and was set for its
third-straight weekly gain with a 1.3 percent advance. The index
has gained about 17 percent year-to-date, compared to a loss of
nearly 18 percent last year.
Hong Kong shares reached a 16-month peak and have
climbed some 21 percent so far this year despite facing bouts of
pressure from sputtering mainland Chinese markets. Shanghai
shares jumped 1.2 percent.
"People were gloomier at this time last year, but now,
judging from the flows, they seem to be very optimistic and
positioning for policy changes next year in China," said Larry
Jiang, chief investment strategist at Guotai Junan International
Australian shares rose 0.9 percent to a six-week
closing high, with top miners supported by rebounding iron ore
Investors will focus on a slew of Chinese data due over the
weekend including industrial output, after recent manufacturing
surveys pointed to a recovery from lows earlier this year.
"One of the reasons for the gains is better news we've seen
from China and expectations the economy there has stabilised and
growth has improved modestly," said Michael McCarthy, chief
market strategist at CMC Markets.
Despite some positive signs in the world's second-largest
economy, the Asian Development Bank slightly cut its 2012 and
2013 growth estimates for developing Asia on Friday as frail
global demand continues to drag on the region.
Buoyed by strong domestic consumption and government
spending, developing Asian economies have shown relatively more
resilience compared with developed and more export-reliant
economies such as Japan and south Korea.
South and Southeast Asian bourses have outperformed, with a
32 percent year-to-date surge in the Philippines, a 30
percent gain in Thailand, Indian shares rising
26 percent and Indonesia up 12 percent to date.
Japan's Nikkei stock average was barely changed,
hovering near seven-month highs hit on Thursday.
The dollar traded at 82.47 yen, sticking close to a
7-1/2-month high of 82.84 hit on Nov. 22.
As superstorm Sandy disrupted U.S. economic activity,
nonfarm payrolls in November are expected to have increased only
93,000, compared to October's 171,000 job gain, a Reuters survey
of economists showed. The unemployment rate is seen holding
steady at 7.9 percent.
"A soft number should reinforce the case for the Fed doves
ahead of next week's FOMC meeting where QE is likely to be
increased in order to at least offset the expiration of
Operation Twist. Hence a soft report should hurt USD and vice
versa," Sean Callow, senior currency strategist at Westpac bank
in Sydney, said in a note.
At its Dec. 11-12 meeting, the Federal Reserve is expected
to announce a new round of Treasury bond purchases to reinforce
quantitative easing, replacing the expiring programme called
Operation Twist, under which it bought $45 billion of
longer-dated bonds a month while selling its shorter-date
With little to show after a month of posturing, the White
House and Republicans in Congress dropped hints on Thursday that
they had resumed low-level private talks on breaking the
stalemate over the "fiscal cliff."
Markets have been keeping up hope that Washington would
eventually avert some $600 billion of tax hikes and spending
cuts scheduled to start in January. Economists have warned that
if Congress failed to reach an agreement, the U.S. economy could
slip back into recession, further weighing on the fragile global
EURO ON DEFENSIVE
The euro steadied at around $1.2968. The euro slid
nearly 1 percent to a one-week low of $1.2950 on Thursday
in its biggest one-day loss in a month on prospects for interest
rate cuts next year.
European Central Bank President Mario Draghi said on
Thursday policymakers had held a wide discussion on interest
rates, including negative deposit rates, which means effectively
charging depositors rather than paying them interest, with an
aim of forcing banks to put their money to work elsewhere.
The ECB also projected gross domestic product next year
could range from a contraction of 0.9 percent to growth of 0.3
percent, suggesting contraction is far more likely than not.
"It is unusual that a negative growth projection for the
next year is offered before the end of the current year, but
with such a view, markets are naturally pricing in a interest
rate cut," said Daisuke Karakama, market economist for Mizuho
Corporate Bank in Tokyo.
He expected the euro to remain vulnerable with the risk of
falling back to $1.2 at some point, but the single currency
appeared to be supported currently by year-end repatriation
U.S. crude futures inched up 0.4 percent to $86.58 a
barrel and Brent rose 0.2 percent to $107.29.
A firm tone in broad assets soothed sentiment for Asian
credit markets, narrowing the spreads on the iTraxx Asia
ex-Japan investment-grade index by 2 basis points.