* MSCI Asia ex-Japan inches up, Nikkei rises to 4-1/2-year
* Euro stabilises on Cyprus optimism
* Dollar underpinned by U.S. economy, Fed's easy stance
* China manufacturing activity improves in March
* European shares likely to ease
By Chikako Mogi
TOKYO, March 21 (Reuters) - Asian shares inched higher and
the dollar steadied on Thursday, as a pick-up in Chinese factory
activity and a commitment by the U.S. Federal Reserve to its
aggressive stimulus stance soothed sentiment rattled by
wrangling over a bailout plan for Cyprus.
European markets, however, were expected to ease as
investors await negotiations over the Cyprus deal, with
financial spreadbetters predicting London's FTSE 100,
Paris's CAC-40 and Frankfurt's DAX to open down
as much as 0.2 percent.
Benchmark indices in Spain and Italy were
seen to open 0.3 percent and 0.2 percent lower respectively.
U.S. stock futures were little changed, hinting at a calm
Wall Street start.
The HSBC Purchasing Managers' Index for China revived to
51.7 in March from 50.4 in February, pointing towards solid but
not spectacular first-quarter growth in the world's
"China's growth at 10 percent is amazing, growth at 8
percent is quite strong, but China growth at 6 percent is still
a lot better than any other developed country out there," said
Carl Larry, president of Houston-based Oil Outlooks and
The MSCI's broadest index of Asia-Pacific shares outside
Japan, rose 0.1 percent. Hong Kong shares
gave up earlier gains to trade nearly flat while Shanghai shares
entered positive territory to add 0.4 percent after the
Shares in Australia gave up early gains to end a
volatile session 0.2 percent lower, hit by political uncertainty
as Prime Minister Julia Gillard faced a leadership challenge.
The Chinese data earlier lifted the Australian dollar
to a high of $1.0393 before it retreated to $1.0373.
China is Australia's largest trading partner.
South Korean shares trimmed earlier gains to ease
0.3 percent, weighed down by cyber security scare and tensions
with North Korea.
North Korea said it would attack U.S. military bases on
Japan and the Pacific island of Guam if provoked, a day after
leader Kim Jong-un oversaw a mock drone strike on South Korea.
"The HSBC figures were definitely a help," said Guy Stear,
head of research with Societe Generale in Hong Kong. But he said
there were lingering concerns about the strength of China's
While developments in the United States and other major
economies affected broader trends in Asia, market players were
increasingly looking at individual countries or region for
"Asia this year is much more of a country by country or
region by region case than it was last year for example." he
Japan's Nikkei stock average climbed 1.3 percent,
hitting a 4-1/2-year high as exporters gained on the Fed's
continued stimulative stance and expectations of further
monetary easing by the Bank of Japan.
New BOJ governor and his two deputies will hold the central
bank's inaugural news conference later on Thursday. They are
under pressure to deliver strong reflationary steps as part of
Prime Minister Shinzo Abe's drive to end deflation and bolster
Such views sent the 10-year Japanese government bond yield
down to 0.58 percent, the lowest since June 2003.
The dollar steadied against a basket of major currencies
and was trading around 95.81 against the yen.
The Fed kept its aggressive policy stimulus despite
improvements in the U.S. economy, pointing to still-high
unemployment, fiscal headwinds out of Washington and risks from
Fed Chairman Ben Bernanke said the central bank might slow
the pace of its bond buying but only after the labour market
showed sustained improvement over a number of months.
The euro inched up 0.1 percent to $1.2948, off a
four-month low of $1.2844 hit on Tuesday, as investors bet on
policymakers finding a fix for a Cyprus bailout after the
country rejected the terms of a European Union rescue.
"Market participants are probably right to expect a
resolution of the immediate crisis that does not destabilize
broader European and global financial markets," Barclays Capital
said about the bailout prospects for Cyprus.
U.S. crude futures fell 0.3 percent to $93.28 a
barrel while Brent eased 0.1 percent to $108.67.
London copper extended gains to rise 0.9 percent to
$7,687 a tonne.
"Demand from China is showing signs of picking up and the
U.S. commitment to its easing policy should feed into more
demand," said economist Alexandra Knight at National Australia
Bank in Melbourne.