Asia stocks follow global surge, US dollar on defensive

TOKYO (Reuters) - Asian stocks took cues from a global surge in equities and rose on Thursday, while the dollar was on the defensive after weak U.S. economic data.

MSCI's broadest index of Asia-Pacific shares outside Japan climbed 0.4 per cent. South Korean and Australian stocks gained, while Japan's Nikkei stood flat.

Wall Street shares posted sizeable gains overnight on several strong corporate earnings results and the pan-European Eurofirst 300 index of leading shares climbed to a 14-year high after the European Central Bank affirmed its loose policy stance.

In currencies, the dollar lurched lower against the euro and yen after dropping the previous day on weak U.S. industrial output and New York state manufacturing activity data. The soft indicators fed uncertainty over the timing of the Federal Reserve's interest rate hike.

The euro rose 0.4 per cent to US$1.0732, adding to overnight gains. The dollar extended losses and slipped 0.2 percent to 118.95 yen.

The market will look to U.S. housing data later in the day for further dollar incentives.

"Even if the actual number is in line with expectations, it will be enough to reinforce the view that the U.S. economic slowdown during winter was a temporary one, and thus support the dollar," said Masafumi Yamamoto, senior strategist at Monex Securities in Tokyo.

"If the dollar is to rise, it will gain more against the euro and Australian dollar rather than the yen as Japanese authorities have not exactly welcomed a further weakening," he said.

The Australian dollar rose 0.4 per cent to US$0.7710 after gaining 0.7 percent on the greenback's broad weakness. The market awaited Australia's employment data due later in the session to see if the Aussie could retain its big gains.

A surge in crude oil also supported commodity currencies such as the Canadian dollar. U.S. crude rallied after government data showed oil inventories in the United States rose less than expected last week.

U.S. crude was down 0.5 per cent at US$56.08 a barrel after jumping nearly 6 percent overnight.