* China stocks gain after jump in industrial firm profits
* Dollar index hovers near 6-mth highs as euro sags
* This week’s U.S. data eyed for directional cues
By Shinichi Saoshiro
TOKYO, July 28 (Reuters) - Asian stocks shrugged off a drop in Wall Street and hit a three-year high on Monday, with China taking the lead after data showed a robust jump in profits earned by industrial firms in the world’s second-largest economy.
Spreadbetters expected Europe to open flat to slightly higher, forecasting Britain’s FTSE to start as much as 0.2 higher and Germany’s DAX and France’s CAX to open little unchanged.
The dollar traded near six-months peaks against a basket of major currencies as the euro continued to sag.
Profits earned by Chinese industrial firms rose 17.9 percent in June to 588.08 billion yuan ($94.98 billion) from a year earlier, up sharply from an 8.9 percent rise in May, the National Bureau of Statistics said.
Recent data have reinforced market expectations that the Chinese economy is powering through its recent soft patch as the government uses targeted stimulus measures to support growth.
MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.2 percent after touching a three-year high of 510.01.
China’s CSI300 jumped 2.6 percent, with bank shares surging after Reuters reported the country’s fifth biggest bank by assets plans to seek more private investors. Hong Kong’s Hang Seng index climbed 0.8 percent.
Tokyo’s Nikkei, which hit a six-month closing high Friday, was up 0.4 percent.
Funds from Middle Eastern and Asian investors appeared to be trickling in again as the Muslim fasting month ends, helping to shore up regional stocks, said Soichiro Monji, chief strategist at Daiwa SB Investments in Tokyo.
“Geopolitical concerns remain as the conflict in the Ukraine does not look like it will end soon, but there is some relief spreading that the impact will be contained,” he said.
The focus turned to whether this week’s run of U.S. data would be strong enough to keep fuelling risk appetite.
Upcoming U.S. indicators include the Case-Shiller price index on Tuesday, second-quarter GDP due on Wednesday and non-farm payrolls on Friday.
Factory activity surveys for major Asian economies will also be released on Friday.
The euro traded little changed at $1.3429, within close reach of $1.3421 plumbed on Friday, its lowest since November 2013.
The euro took another hit on Friday when Germany’s Ifo business climate index painted a gloomy picture of the economy.
It had already been under pressure from a range of factors including expectations of further easing by the European Central Bank and diverging interest rates seen favouring the U.S. over Europe.
“We should brace for the euro breaking below key support at 1.34, given diverging U.S. and European monetary policies. Dollar buying pressure is building as shown by the strength of the dollar index, which this week’s data, if upbeat, could enhance further,” said Junichi Ishikawa, market strategist at IG Securities in Tokyo.
The two-day Federal Reserve policy review ending on Wednesday was also in focus but expectations were for Chair Janet Yellen to deliver the usual dovish message.
The dollar index, a gauge of its strength against a basket of key currencies, stood little changed at 81.037 after striking a near six-month high of 81.084 on Friday.
The dollar fetched 101.80 yen, having lost a bit of momentum in the wake of a rise in U.S. Treasury yields after climbing to a two-week high of 101.94 on Friday.
In commodities, Brent crude slipped below $108 a barrel as fighting between Israel and Hamas Islamist militants subsided in Gaza, although underlying geopolitical tensions limited the fall.
Brent shed 57 cents to $107.82 a barrel after a 1 percent gain last week. (Editing by Eric Meijer & Kim Coghill)