Asian shares win reprieve on ESB signal, U.S. jobs next focus

By Hideyuki Sano

TOKYO (Reuters) - Asian shares won a reprieve on Friday after the European Central Bank signalled its readiness to take further steps to shore up the European economy, and investors looked to U.S. jobs data.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.1 percent while Japan's Nikkei <.N225> also ticked up 0.1 percent.

Wall Street shares also ended up on Thursday, though they pared back much of earlier gains, with sentiment still fragile due to fear of hard landing in the Chinese economy.

The S&P 500 gained 0.1 percent but the Nasdaq Composite ended 0.4 percent lower.

The ECB cut its growth and inflation forecasts on Thursday, warning of possible further trouble from China and paving the way for an expansion of its already massive 1 trillion-euro plus asset-buying programme.

For the first time, ECB President Mario Draghi also said explicitly the bond-buying programme may run beyond September 2016 and the bank may adjust its size and composition.

"It looked as if the ECB is preparing stimulus. As it cut its growth projections and uncertainty over emerging economy is rising, it probably had to show that it is ready to take action," said Masahiro Ichikawa, senior strategist at Mitsui Sumitomo Asset Management.

The bank tweaked the programme to increase the share of any sovereign bond issue it may buy to 33 percent from 25 percent, a move market participants interpreted as preparation for more bond purchases.

That pushed down German 10-year yields, the benchmark for euro zone borrowing costs, to 0.72 percent , compared to a two-week high of 0.82 percent hit on Monday.

The euro also fell to a two-week low of $1.10875 and it last fetched $1.1120 . Against the yen, the common currency hit three-month low of 133.135 yen .

While the ECB tilts towards more easing, the U.S. Federal Reserve has so far stuck to its script that U.S. interest rates will likely be raised this year as the U.S. economy continues to expand.

Yet, many investors now think the Fed will refrain from hiking rates at its meeting on Sept 16-17 and could wait even until next year given how unstable financial markets have been in the past few weeks.

That uncertainty over the Fed's timing makes it difficult to predict exactly how markets will react to the U.S. jobs data due at 1230 GMT on Friday, traders say.

A strong number could cement optimism on the global economy and boost share prices but there is risk it could rekindle speculation of an early rate hike, which could hurt risk assets, especially vulnerable ones in emerging economies.

Economists polled by Reuters expect the U.S. economy to have produced 220,000 new non-farm jobs last month, continuing the robust rate of employment creation of the past five years, while average hourly earnings are predicted to have risen by a modest 0.2 percent as they did in July.

In commodities markets, which had been battered by fears of hard landing in China, prices were generally supported though their trading remained highly volatile.

Brent crude futures rose 0.2 percent in early trade to $50.80 per barrel.

Copper surged to $5,314 per tonne on Thursday, its highest in over three weeks, as bearish investors closed out positions ahead of U.S. job data. It last traded at $5,235.

Aluminium also shot up, touching a one-month peak on the London Metal Exchange on Thursday.

(Reporting by Hideyuki Sano; Editing by Eric Meijer)