* MSCI Asia ex-Japan pares losses, Nikkei hits 8-month high
* BOJ tankan business mood survey worsens, yen at 9-mth low
* China HSBC Dec flash manufacturing activity firms slightly
* Chinese shares outperform after solid data
* European shares likely edge higher
By Chikako Mogi
TOKYO, Dec 14 Asian shares were mixed on Friday
with a pick-up in China's manufacturing sector lending support
but worries over the progress of U.S. budget talks to avert the
"fiscal cliff" weighing on investor sentiment.
European shares were expected to start higher, with
financial spreadbetters predicting London's FTSE 100,
Paris's CAC-40 and Frankfurt's DAX will open as
much as 0.3 percent higher. A 0.3 percent gain in U.S. stock
futures hinted at a firm Wall Street open.
A deteriorating business sentiment survey and expectations
that the Bank of Japan will ease policy further to support the
weak economy next week pushed the yen to a near 9-month low
against the dollar and an 8-month low against the euro, helping
Japanese equities wipe out earlier losses.
China shares outperformed Asian peers after the HSBC flash
purchasing managers' index for December hit a 14-month high of
50.9, the fifth straight monthly gain, showing growth in China's
vast manufacturing sector picked up and underlined a brighter
outlook for the economy in coming months.
The private survey followed recent positive data suggesting
Chinese economic activity has gained some momentum in the fourth
quarter after it slowed for seven consecutive quarters.
A state-backed think tank has also forecast China's GDP
growth next year at around 8 percent -- above the likely
government target -- while calling for an expansion in the
central government's fiscal deficit to offset an uncertain
The Shanghai Composite Index soared 4 percent while
Hong Kong shares rose 0.8 percent to a 16-month peak.
"We're seeing positive PMI, industrial data and they are all
pointing to the direction of an economic recovery," said Sijin
Cheng, a commodities analyst at Barclays Capital. "The
underlying demand is going to improve gradually."
MSCI's broadest index of Asia-Pacific shares outside Japan
was little changed, hovering near 16-month highs
which it had hit successively since Dec. 5. The index was set to
end the week up 1.4 percent.
Australian shares ended flat, giving up earlier
gains as investors remained wary of the stalled U.S. budget
A seven-day rally in world shares came to a halt and
commodity prices slipped on Thursday after negotiations over the
U.S. "fiscal cliff" hit a wall.
President Barack Obama and House of Representatives Speaker
John Boehner held a "frank" face-to-face meeting late on
Thursday in an effort to break an impasse in talks to avert the
"fiscal cliff" of some $600 billion of tax hikes and spending
cuts scheduled to start in January.
"With the end of the year coming up, I can't see anybody
taking any significant positions ahead of this political unknown
(the fiscal cliff)," the trader added.
Failure to avert the "fiscal cliff" could derail the
struggling U.S. economic recovery and also snuff out encouraging
signs emerging from China, the world's second-largest economy
after the United States.
"You're not going to get a solution that will be a 100
percent, but it may be a third or a quarter. It will be
something a bit hard to reduce the deficit, but they'll get a
good vote on it which will make it a good rosy story -- the U.S.
is not interested in can-kickers any more," said Jonathan
Barratt, chief executive of Barratt's Bulletin, a Sydney-based
commodity research firm.
YEN SELLING ACCELERATES
In the world's third-largest economy, big Japanese
manufacturers' sentiment worsened in the three months to
December, a Bank of Japan's quarterly tankan survey showed on
Friday, hurting an economy already seen to be in a mild
The data will help reinforce market expectations for the
Japanese central bank to further ease monetary policy.
The yen fell as low as 83.95 against the dollar. The
euro stood at 109.83 yen, its highest in more than
eight months and looked set to end the week up over 3 percent on
Japan's Nikkei share average turned up 0.1 percent,
rebounding from earlier declines.
Japan's conservative Liberal Democratic Party (LDP) is on
track for a stunning victory in Sunday's election, gaining
momentum to pressure the BOJ for more forceful easing.
"The market is growing confident the next government will be
one of the most aggressive about easing that you could think
of," said a trader at a Japanese bank.
Oil prices rebounded from Thursday's fall after Chinese
manufacturing data raised hopes for firmer demand, with U.S.
crude futures rising 0.8 percent to $86.54 a barrel and
Brent adding 0.4 percent to $108.39.
Spot gold steadied near $1,696 an ounce after
tumbling 1 percent the previous session to push prices below
$1,700 for the first time this week. Gold was set for a third
weekly decline as funds liquidate positions to lock in profit
for the year.
Sluggish stocks weighed on Asian credit markets, keeping the
spreads on the iTraxx Asia ex-Japan investment-grade index
barely changed from Thursday.