* MSCI Asia ex-Japan hits 16-month peak, trade cautious
* Nikkei rises to seven-month high, HK touches 16-month peak
* JGB futures scale record high on BOJ speculation
* Markets waiting for ECB president comments later in day
* European shares likely edge higher
By Chikako Mogi
TOKYO, Dec 6 (Reuters) - Asian shares paused after hitting 16-month highs earlier on Thursday thanks to buying from investors reassured by U.S. President Barack Obama saying a deal to avert the so-called fiscal cliff was possible in "about a week" if Republicans compromise on taxes.
Markets have held out hopes of an agreement on ways to cut the fiscal deficit to avoid $600 billion of spending cuts and tax rises being triggered in January, but trading has been choppy and thin ahead of the end of year holiday season, as the consequences of failure to agree could push the U.S. economy into recession.
Year-end positioning was driving flows, while investors waited for the European Central Bank's policy decision later in the day and U.S. jobs data on Friday for clues on the state of the U.S. economy after recent mixed reports.
European shares were expected to rise modestly, with financial spreadbetters predicting London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX to open as much as 0.3 percent higher. A 0.2 percent drop in U.S. stock futures hinted at a weak Wall Street open.
MSCI's broadest index of Asia-Pacific shares outside Japan steadied 0.2 percent to reach a 16-month high before edging down 0.1 percent.
South Korean shares struck a seven-week high before trimming gains to stand just 0.1 percent inside positive territory, while Australian shares ended down 0.3 percent on worries Australia's central bank may not have done enough to shore up the domestic economy.
"You've got America facing its fiscal cliff and you have Europe with its sovereign debt problems. So when you put all of that together it doesn't suggest that world growth is very strong."
Hong Kong shares hit a 16-month peak while the Shanghai Composite Index recouped earlier losses to hold steady, after jumping above the 2,000-point mark for the first time since late November on Wednesday.
Investors continued to buy into Chinese infrastructure-related and financial sectors, a day after comments from the new Communist Party chief set the economic agenda for 2013.
"Investors are aligning themselves along Beijing policy lines more aggressively now after Xi Jinping's comments, but we still lack details on the exact implementation," Edward Huang, an equity strategist with Haitong International Securities.
Japan's Nikkei stock average rose 0.8 percent to a fresh seven-month closing high, as exporters drew support from a weaker yen.
U.S. Treasuries were firm in Asia, with 10-year Treasury yields hovering near a three-week low at 1.591 percent on concerns over the fiscal cliff and hopes for fresh easing steps by the Federal Reserve.
Japanese media reporting that the main opposition party is set to win a solid majority in a Dec. 16 election reinforced expectations of more aggressive monetary easing, hoisting benchmark 10-year Japanese government bond futures up to a record high of 145.24 and drove the benchmark 10-year JGB yield down to a 9-1/2-year low of 0.690 percent.
Market attention on U.S. fiscal woes probably reflected more investor lethargy than any real U.S. concern, said Credit Agricole CIB analysts in a research report.
"Once markets fully embrace a 'two-step' U.S. fiscal solution between Democrats and Republicans (i.e. with any grand bargain coming in Q1 2013), a comparison of expected 2013/14 growth profiles clearly favours renewed (U.S. dollar) strength," they said.
The dollar edged up 0.2 percent against a basket of major currencies and traded at 82.48 yen, not far from a 7-1/2-month high of 82.84 hit on Nov. 22.
The euro eased 0.1 percent to $1.3055, off a seven-week high of $1.3127 touched on Wednesday before a disappointing Spanish bond auction reminded investors of the country's fragile finances, prompting them to selloff the single currency.
The ECB is expected to keep its benchmark interest rate on hold at 0.75 percent, and investors will be looking for clues on whether ECB President Mario Draghi will signal future interest rate cuts as the euro zone recession deepens.
Data from Asia on Thursday illustrated a patchy economic picture.
Australian employment topped expectations for a second month in November and the jobless rate unexpectedly fell to a three-month low of 5.2 percent, lifting the local currency by a third of a U.S. cent to $1.0471.
The report could lessen the urgency for the Reserve Bank of Australia to follow up with more interest rate cuts to support growth, after it earlier this week eased rates to match the record low 3 percent touched during the global financial crisis.
Growth this year in Asia's fourth-largest economy, South Korea, will likely fall below the Bank of Korea's 2.4 percent target, the central bank said Thursday.
U.S. crude futures eased 0.2 percent to $87.76 a barrel and Brent steadied around $108.82.
Spot gold fell 0.2 percent to $1,689.10 an ounce. Gold fell to a one-month low below $1,700 on Wednesday on fund liquidation after a weaker price forecast by Goldman Sachs.