Asia extends global stocks rally as upbeat U.S. GDP soothes sentiment

By Lisa Twaronite

TOKYO (Reuters) - Asian shares extended a global rally on Friday after upbeat U.S. economic data calmed sentiment shaken by days of turmoil in Chinese equities.

Wall Street rose sharply overnight thanks to revised U.S. gross domestic product data showing the economy grew faster than initially thought in the second quarter - a reassuring sign amid worries over deepening economic woes in China.

MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.7 percent, but was still poised to lose 0.4 percent for the week in which it logged three-year lows as plunging Chinese shares sent financial markets into a tailspin.

On Thursday, the S&P 500 recovered about half of its 11-percent drop over six days.

The improved mood drove Japan's Nikkei stock index <.N225> up 2.4 percent, though it was still down more than 2 percent for the week.

Crude oil futures edged down, after a short-covering rally in the previous session sent both U.S. crude and Brent rocketing more than 10 percent each, their biggest one-day gains since 2008. Oil had plunged to 6-1/2-year lows earlier this week.

U.S. crude inched down about 0.1 percent to $42.52 a barrel, while Brent crude was down about 0.4 percent at $47.39.

Besides the upbeat U.S. GDP, last week's jobless claims also fell more than expected. That kept alive speculation that the Federal Reserve could raise interest rates this year if the economic momentum continues.

"Concerns about a possible softening in China's economic growth have been offset by news of a sharp upward adjustment in US 2nd quarter GDP," said Sydney-based Ric Spooner, chief market analyst at CMC Markets in a note to clients.

"From a growth point of view, the US Fed looks well placed to begin increasing interest rates in December."

The dollar index , which tracks the greenback against a basket of six rival currencies, last traded at 95.773, up about 0.2 percent, after logging a one-week high of 96.031 in the previous session. The index remained well above a seven-month low of 92.621 touched on Monday.

The dollar was steady from late U.S. levels at 121.03 yen , significantly above Monday's nadir of 116.15. The euro was also steady at $1.1246 .

Investors' focus remained on an annual meeting of the world's top central bankers at the Jackson Hole Economic Symposium in Wyoming, seeking clues on how the fallout of the recent market turbulence could affect the U.S. central bank's future policy steps.

"We have to be careful ... trying to decide today how we might react to" recent financial market volatility, Kansas City Federal Reserve Bank President Esther George told Bloomberg TV in an interview that aired on Thursday. George, known as a hawk, said that the U.S. economy still appears to be on solid ground.

Her comments followed New York Federal Reserve President William Dudley's remarks on Wednesday that the prospect of a September rate hike "seems less compelling to me than it was a few weeks ago" in light of the global market volatility.

Gold was slightly higher at $1,126.56 an ounce but still on track for a nearly 3 percent loss for the week.

(Editing by Shri Navaratnam)