(In 13th paragraph, corrects to say reflationary instead of deflationary)
* MSCI Asia ex-Japan hits seven-week high
* Nikkei set for best April in 20 years
* Dollar up vs yen, euro capped by expectations of ECB rate cut
* European shares likely extend gains
By Chikako Mogi
TOKYO, April 30 (Reuters) - Asian shares advanced on Tuesday with investor risk appetite bolstered by expectations for U.S. Federal Reserve and the European Central Bank to continue with growth-supportive monetary stimulus measures.
European stock markets were seen extending gains, with financial spreadbetters predicting London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX would open up as much as 0.6 percent. Benchmark index in Italy was also set to open 0.5 percent higher, as investors welcome signs of political stability.
U.S. stock futures were down 0.1 percent, hinting at a subdued Wall Street open after the Standard & Poor's 500 Index closed at a record high on Monday.
MSCI's broadest index of Asia-Pacific shares outside Japan climbed as much as 1.1 percent to a seven-week high, putting the index on course for a monthly rise of 2.3 percent.
Toru Yamamoto, chief strategist at Daiwa Securities in Tokyo, wrote in a note to clients that with markets driven more by national policies that fundamentals, the only focus for investors should be government and central bank policies.
"While the music is playing, there may be no choice but to keep dancing," he wrote.
Given a deteriorating European economy, the ECB is expected to cut the euro zone's main interest rate by 25 basis points at its meeting on Thursday, which could give global markets a lead.
"A key trigger next month could be interest rate cuts by Europe's central bank," said Kim Hak-kyun, an analyst at KDB Daewoo Securities in Seoul.
South Korean shares led the gains in Asia with a 1.3 percent rise to reach their highest levels in nearly four weeks.
China's markets have been closed since Monday for a national holiday and will reopen on Thursday, while Hong Kong will close on Wednesday and also reopen on Thursday.
The Australian benchmark share index jumped 1.1 percent to reach its highest in nearly five years, with financials advancing after Australia and Zealand Banking Group reported strong first-half earnings.
Japan's Nikkei stock average eased 0.1 percent, undermined by weak earnings guidance from Fanuc Corp and Honda Motor, but it was on track for its best April in 20 years. Japanese markets were closed on Monday for a holiday.
Expectations for aggressive reflationary policy in Japan has led to a sharp weakening of the yen over recent months, improving corporate sentiment among export driven manufacturers.
A more positive mood was reflected in economic indicators released earlier on Tuesday.
A Markit/JMMA survey showed manufacturing activity in April expanded at the fastest pace in just over a year. There were also signs of a recovery in consumer sentiment, as household spending rose 5.2 percent year-on-year in March, far outpacing expectations for a 1.8 percent increase.
And, while industrial output grew more slowly than expected at 0.2 percent in March from February, manufacturers expected output to pick up to 0.8 percent in April.
The dollar was up 0.1 percent at 97.84 yen.
The dollar has retreated from a four-year high of 99.95 hit earlier this month but has mostly stayed above 97 yen since the Bank of Japan unveiled its unprecedented plan on April 4 to double the monetary base in two years to achieve 2 percent inflation in that time.
STOCKS BEAT GOLD
Spot gold fell 0.8 percent to $1,464.51 an ounce after bargain hunting tapered off, with the lack of investor confidence highlighted by daily outflows from exchange-traded funds and surging stocks tempting investors to switch to equities.
"Really what we need to see is a series of closes above $1,505 to take the pressure off," said Tim Riddell, head of ANZ Global Markets Research, Asia, adding that a drop below $1,435 could trigger a favoured technical pullback to $1,300 and potentially even as deep as $1,245.
The euro inched up 0.1 percent to $1.3107, supported by the formation of a government in Italy but capped by expectations for an ECB rate cut.
The new government in Italy ended a two-month political vacuum in the euro zone's third-largest economy. Relief helped bring down Italy's five- and 10-year borrowing costs down to their lowest level since October 2010 on Monday.
New Prime Minister Enrico Letta promised to push for a change to Europe's focus on austerity and pursue growth.
In the United States, investors saw little reason for the Fed to change its very accommodative stance at its two-day meeting ending on Wednesday, as recent data has been mixed and inflation soft.
London copper steadied around $7,150 a tonne but faced its biggest monthly loss in six months as a worsening outlook for global growth drove investors to cut commodities exposure, but expectations of more central bank easing curbed losses.
U.S. crude was down 0.1 percent at 94.37 a barrel and Brent eased 0.2 percent to $103.57. (Additional reporting by Hyunjoo Jin in Seoul and Lewa Pardomuan in Singapore; Editing by Simon Cameron-Moore)