An HSBC survey of Chinese manufacturers suggesting growth was recovering in the world's second largest economy helped trim declines in Asian shares on Wednesday, though investors remained wary due to weak corporate earnings worldwide and enduring worries over a global slowdown.
European shares will likely rise, with financial spreadbetters expecting London's FTSE 100 to open up as much as 0.3 percent and Paris's CAC-40 seen opening 0.9 percent higher.
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The MSCI index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> slid 0.2 percent. China's Shanghai Composite was up 0.3 percent and was the region's best performing index. Hong Kong's Hang Seng was little changed.
Japan's Nikkei average <.N225> recovered slightly from its earlier 1 percent drop but was still down 0.5 percent dragged down by weakness in shares of export-oriented firms.
The China HSBC Flash Manufacturing Purchasing Managers Index (PMI) rose to a three-month high of 49.1 in October, also registering the most robust order books since April, signalling a strengthening recovery.
"Recent data have suggested that Chinese growth may have bottomed out last month, helping to improve market sentiment as U.S. economic figures have also been hinting at a brightening recovery trend recently," said Kyoya Okazawa head of global equities at BNP Paribas in Tokyo.
In a sign of capital flows back to the region, particularly into Hong Kong, the territory's de facto monetary authority has intervened thrice in the currency market since last Friday to curb the Hong Kong dollar's strength after it hit the top-end of its trading band.
But corporate earnings were a bigger focus for South Korean shares <.KS11>, which fell 0.7 percent, as lacklustre results in local and international markets weighed on investor sentiment.
Shares of market heavyweight Samsung Electronics <005930.KS> fell a percent while Hyundai Motor <009540.KS> was off 2.7 percent.
The dollar was steady against the yen at 79.82 yen, having hit its highest since early July of 80.02 on Tuesday.
The Australian dollar rose to a high of $1.0317 after the PMI report on China, having earlier risen from around $1.027 following data showing Australian consumer prices increased a surprisingly large 1.4 percent last quarter, lowering expectations for interest rate cuts.
The Aussie rose 0.5 percent against the yen to 82.33 yen, helping the euro to steady against the yen at 103.70 yen. The euro touched a 5/1-2 month high against the yen of 104.45 on Tuesday.
Markets may remain cautious, but their response "is more geared towards consolidating risky assets near lower levels that justify bearing the risk, rather than the pre-announcing more difficulties to come", Barclays Capital said in a research note.
On Tuesday, U.S. stocks fell, with the Dow industrials suffering the biggest drop since June 21 after DuPont and United Technologies showed profit growth slowing, adding to a string of disappointments from companies falling short of Wall Street's expectations.
U.S.-listed shares of foreign companies slid across the board on Tuesday, also on fresh worries over the euro zone's debt crisis as Spanish bond yields rose after Moody's Investors Service downgraded five of Spain's regions.
Spot gold was steady at $1,708.59 an ounce after falling 1.2 percent to a six-week low of $1,703.50 on Tuesday as other assets fell.
U.S. crude rose 0.6 percent to $87.18 after settling at a three-month low of $86.67 on Tuesday. Brent crude futures were up 0.7 percent at $108.83.
The euro recovered to $1.2980 from Tuesday's low of $1.2952, but well below last week's high of $1.3140. The euro's low this month was around $1.2804.
Investors continue to wait both for Spain to ask for aid to help manage its huge public debts with external funds, and for Greece to agree to conditions attached by its global lenders in exchange for a further bailout.
Germany's Sueddeutsche Zeitung paper reported in its Wednesday edition, without citing sources, that euro zone states will grant Greece an extra two years to bring its budget deficit to within agreed targets.
The euro could be pressured if initial readings of euro zone purchasing managers' index and a German Ifo business sentiment survey due later on Wednesday signal further deterioration.
U.S. Federal Reserve Chairman Ben Bernanke has told close friends he probably will not stand for a third term at the central bank even if President Barack Obama wins the November 6 election, the New York Times reported.
Under Bernanke, the Fed has taken aggressive easing policies to help underpin the tepid U.S. recovery. The Fed is unlikely to take fresh steps when it ends a two-day meeting on Wednesday, opting to assess the impact of last month's aggressive quantitative easing measures.
(Additional reporting by Joyce Lee in Seoul and Vikram Subhedar in Hong Kong; Editing by Simon Cameron-Moore)