Asian shares inch down from recent highs

An index of Asian shares pulled away from a three-year high on Friday after a mostly flat day on Wall Street, though a fresh S&P closing record and upbeat US employment data underpinned sentiment.

Initial jobless claims declined 19,000 to a seasonally-adjusted 284,000 for the week ended July 19. That was the lowest since February 2006.

A separate report showed new home sales dropped 8.1% in June, their biggest decline since July of last year. But economists noted that other data have pointed to housing getting back on track after stalling late last year.

"There is no question that the labour market is strengthening but the pace of improvement is still falling short of the Fed's expectations," Kathy Lien, managing director of FX strategy at BK Asset Management, wrote in a note to clients.

Fed Chair Janet Yellen said last week that the Fed could raise rates sooner than initially expected if labour markets continued to improve. Most economists expect the US central bank to start raising interest rates in the second half of next year.

MSCI's broadest index of Asia-Pacific shares outside Japan was down about 0.1% in early trade, though still on track for solid weekly gain, while Japan's Nikkei stock average added 0.4%.

On Wall Street overnight, the S&P 500 eked out a slight gain to its second record closing high in a row, even after earnings painted a mixed picture of the economy.

However, after a run of solid tech sector results this week, Amazon dealt a blow to sentiment by reporting a much bigger loss than anyone had expected, even as its sales surged. Shares in the United States's biggest online retailer tumbled 10.6% in after-hours trade to $320.52, wiping more than $17 billion from its market valuation.

Ongoing unrest in the Middle East and Ukraine continued to keep investors on their toes for any developments that could have a wider impact on risk sentiment and markets.

Gazan authorities said Israeli forces shelled a shelter at a U.N.-run school on Thursday as any truce remained elusive. Meanwhile, a US State Department spokeswoman said that Russia was firing artillery across its border with Ukraine to target Ukrainian military positions.

Upbeat data helped the euro climb off an eight-month low of $1.3438 touched on Thursday. The common currency was steady on the day in Asia at $1.3465.

Private reports showed business activity in Germany and France strengthened in both July and June, but risks to the euro zone economy from any tougher sanctions on Russia limited the euro's gains.

The dollar was little changed against the yen at 101.79 after spiking more than 0.3% overnight to a two-week high of 101.86 yen after the US jobless claims data.

The greenback, which has been closely correlated to US yields, got a lift as US Treasury yields rose after the benefit claims report. On the week it was poised to gain about 0.4% against the Japanese currency.

The yen showed little reaction to Japanese consumer prices data released early on Friday that were in line with forecasts and did not do much to stir expectations for further monetary easing by the Bank of Japan. Core consumer prices rose 3.3% in June from a year earlier, matching forecasts.

Gold was steady at $1,292.71 an ounce after dropping to a one-month low overnight on the improved US and European economic data, though the Gaza and Ukraine tensions limited losses by supporting demand for safe-haven assets.

US crude edged down to $102.01 a barrel.