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Tokyo - Asian shares touched fresh 16-month highs on Friday as investors awaited US nonfarm payrolls data due later in the day, with sentiment underpinned by signs that China's economy is stabilising.

European shares will likely gain modestly, with financial spreadbetters predicting London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX to open as much as 0.4 percent higher. A 0.1 percent rise in US stock futures hinted at a steady Wall Street open.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.5 percent, and was set for its third-straight weekly gain with a 1.3 percent advance. The index has gained about 17 percent year-to-date, compared to a loss of nearly 18 percent last year.

Hong Kong shares reached a 16-month peak and have climbed some 21 percent so far this year despite facing bouts of pressure from sputtering mainland Chinese markets. Shanghai shares jumped 1.2 percent.

“People were gloomier at this time last year, but now, judging from the flows, they seem to be very optimistic and positioning for policy changes next year in China,” said Larry Jiang, chief investment strategist at Guotai Junan International Securities.

Australian shares rose 0.9 percent to a six-week closing high, with top miners supported by rebounding iron ore prices.

Investors will focus on a slew of Chinese data due over the weekend including industrial output, after recent manufacturing surveys pointed to a recovery from lows earlier this year.

“One of the reasons for the gains is better news we've seen from China and expectations the economy there has stabilised and growth has improved modestly,” said Michael McCarthy, chief market strategist at CMC Markets.

Despite some positive signs in the world's second-largest economy, the Asian Development Bank slightly cut its 2012 and 2013 growth estimates for developing Asia on Friday as frail global demand continues to drag on the region.

Buoyed by strong domestic consumption and government spending, developing Asian economies have shown relatively more resilience compared with developed and more export-reliant economies such as Japan and south Korea.

South and Southeast Asian bourses have outperformed, with a 32 percent year-to-date surge in the Philippines, a 30 percent gain in Thailand, Indian shares rising 26 percent and Indonesia up 12 percent to date.

Japan's Nikkei stock average was barely changed, hovering near seven-month highs hit on Thursday.

The dollar traded at 82.47 yen, sticking close to a 7-1/2-month high of 82.84 hit on November 22. - Reuters