TOKYO: Asian shares rose to a nine-month peak on Friday, helped by firmer global equities overnight, but flows were largely dictated by month- and year-end position-squaring, with investors taking profits on the rises and buying on dips.
Investors were seeking incentives to trade from data out of Asian countries on Friday and Saturday which could offer signals for the likely direction of global economic growth, amid unclear prospects for the US budget talks and the apparently abating risk of an imminent Greece bankruptcy.
Japan's industrial output unexpectedly rose 1.8 percent in October, up for the first time in four months, government data showed on Friday, suggesting the impact of the global slowdown and a diplomatic row with China may have run its course.
But Japanese manufacturing activity contracted in November at the fastest pace in 19 months, weighed by falling exports, weak domestic demand and declining capital expenditure.
In South Korea, another big export-reliant economy, industrial output grew for a second month in a row in October, backing expectations for a recovery in the current quarter.
Later on Friday, India will report its third-quarter gross domestic product at 0530 GMT and China will release the official manufacturing PMI for November on Saturday.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.6 percent to its highest since March 1, and was on course for a monthly gain of 2.1 percent.
Australian shares added 0.7 percent to a fresh three-week high, while South Korean shares erased earlier losses to edge up 0.2 percent and held around a three-week high, although institutional investors turned net sellers after six consecutive days of buying.
"Institutional investors are taking profits at the end of the month after their recent buying spree," said Lee Jae-hoon, an analyst at Mirae Asset Securities.
Japan's Nikkei stock average advanced 0.9 percent to a seven-month high, drawing support from an ongoing weak yen.
Flows related to end-month demand drove the euro and the dollar higher against the yen. The dollar rose 0.4 percent to 82.40 yen, moving towards the 7-1/2-month high of 82.84 yen hit last week, while the euro jumped 0.6 percent to 107.17 yen, after hitting a seven-month high of 107.29 earlier.
"The market is subject to mood swings by investors who pay close attention to small developments in the US budget talks, but as long as the yen does not rise far from current levels, we may see a slow but steady rise in the market," said Takuya Takahashi, an analyst at Daiwa Securities.
Financial markets swung around on Thursday after comments by US legislators dampened optimism that an agreement would be reached to avoid a series of tax hikes and spending cuts which could put the world's biggest economy back into recession.
The pan-European FTSEurofirst 300 index ended up 1.1 percent on Thursday, its highest closing level since July 2011. The index, led by mining stocks, rose on growing optimism a deal will be reached to avoid a nasty fiscal crunch.
US stocks and the euro rose but remained tense as the Speaker of the US House of Representatives, John Boehner, indicated no substantive progress over the last two weeks in talks to reach a budget deal. Less than 24 hours earlier, the Republican said he was "optimistic" about reaching a pact.
Democratic Senate Majority Leader Harry Reid struck back, saying later his party was still waiting for a reasonable proposal from the Republicans.
A survey published on Thursday showed euro zone economic morale in November improved for the first time in almost a year, with Germany and France gaining strongly, but industry's reluctance to invest could make a quick recovery from recession unlikely.
The euro was up 0.2 percent to $1.3004, below $1.3015 on Thursday, its highest level since Oct. 31.
The euro has been supported after global lenders earlier in the week agreed to unblock more aid to debt-stricken Greece, pushing down borrowing costs in other indebted countries such as Spain and Italy substantially. Italy's 10-year bond yield hit its lowest in two years at an auction on Thursday.
Germany's parliament will approve a fresh bailout for Greece on Friday but Germans are deeply uneasy over the costs of the euro zone debt crisis.
In the US, the government said on Thursday third-quarter gross domestic product expanded at a 2.7 percent annual rate, its fastest pace since late 2011, with export growth helping to offset the weakest consumer spending and the first drop in business investment in more than a year.
US crude futures fell 0.4 percent to $87.72 a barrel while Brent eased 0.3 percent to $110.43, after they rose the previous day on optimism over the US budget talks and escalating violence and political tension in Syria and Egypt which stoked fear of oil supply disruptions.
Reflecting a general caution despite rising equities, Asian credit markets were lacklustre, keeping the spreads on the iTraxx Asia ex-Japan investment-grade index little changed.