Asian Shares At Three-month High, China Data Spurs Easing Hopes

TOKYO (Reuters) - Asian shares rose to a three-month high on Thursday after softer Chinese inflation and industrial output data left room for more policy easing to support growth.

The new data added to growing but still guarded investor optimism that European policymakers will take decisive action to tackle the euro zone debt crisis, helping Asian equities rally for the fourth-straight day.

European stocks were likely to follow Asia higher, while a 0.2 percent gain in U.S. stock futures signaled a solid Wall Street start. Financial spreadbetters called the main indexes in London <.ftse>, Paris <.fhci> and Frankfurt <.gdaxi> to open up as much as 0.4 percent. <.eu><.l><.n/>

MSCI's broadest index of Asia-Pacific shares outside Japan <.miapj0000pus> rose 0.9 percent, led by a 1.7 percent advance in Korean shares <.ks11>, while Australian shares <.axjo> erased earlier gains made on data showing employment rose and the jobless rate ticked down in July, to trade little changed.

"Investors are continuing to shed safe havens while adding risk, with foreign investors unrelenting in their appetite for local stocks," said Cho Sung-joon, an analyst at NH Investment & Securities, speaking of Korean shares.

Japan's Nikkei stock average <.n225> hit the psychologically key 9,000 mark for the first time in five weeks before easing slightly, but was still up 0.9 percent. <.t/>

China's annual consumer inflation fell to a 30-month low of 1.8 percent in July while producer prices dropped 2.9 percent year-on-year in July.

"This number gives more room for policy easing. It is now pretty clear that CPI will likely be below the official 4 percent target for the year, so the policy focus for the government can stay clearly on growth," said Zhang Zhiwei, chief China economist at Nomura in Hong Kong.

Annual growth in China's factory output slowed to 9.2 percent in July, the weakest in just over three years and below market expectations, while a 13.1 percent year-on-year rise in retail sales also undershot forecasts, reinforcing market expectations that Beijing will further loosen monetary policy before the end of September.

South Korea's central bank kept interest rates steady on Thursday as widely expected to assess the impact of last month's surprise cut, but investors continue to price in another reduction soon to shore up Asia's fourth-largest economy.

The Bank of Japan also stood pat, as expected, ending its two-day policy meeting with no announcement of new monetary easing steps.

VAGUE HOPES

Markets have been supported by hopes that the European Central Bank will start buying sovereign bonds to lower borrowing costs for Spain, and that the Federal Reserve will expand its monetary easing, despite a lack of comments or data supporting such views, and suggestions from the authorities that any steps were not likely to be taken before September.

The euro steadied at $1.2366, capped below a one-month high of $1.2444 hit on Monday. The Australian dollar hit a peak of $1.0615, its highest since March 20, helped by the solid jobs figures that fortified views the central bank will stand pat for now.

"The euro, while there are risks, has been supported by the notion that something will be done (about the debt crisis) regardless of the time it may take," said Hiroshi Maeba, head of FX trading Japan for UBS in Tokyo.

As euro short-covering had been completed, the currency was expected to stick to narrow ranges until fresh factors emerged, Maeba said.

While he believes the Australian dollar may be approaching a near-term top after rallying to its highest since March earlier this week, it could continue to draw support from the country's relatively high yields compared to countries where yields are negative.

A firmer euro and the prospect for further China monetary stimulus underpinned gold, which added 0.2 percent to $1,614.91 an ounce.

Oil firmed, with Brent barely changed at $112.10 a barrel and U.S. crude up 0.1 percent at $93.45 a barrel.

Asian credit markets were resilient, with the spread on the iTraxx Asia ex-Japan investment-grade index tightening by 1basis point and hovering near a four-month low.

(Additional reporting by Joonhee Yu in Seoul; Editing by Eric Meijer & Kim Coghill)

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