Asian shares gain on earnings optimism, dovish Fed

TOKYO (Reuters) - Asian shares advanced to one-month highs when markets opened on Wednesday, helped by Wall Street which gained on optimism over corporate earnings and prospects the U.S. Federal Reserve will reaffirm its willingness to wait longer before raising interest rates.

MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.3 per cent, led by 0.6 per cent rise in South Korean shares while Japan's Nikkei share average edged up 0.5 pe rcent.

U.S. stocks rose more than 1 per cent on Tuesday, with the S&P 500 coming less than two per cent below its record peak set last month.

The Fed is widely expected to announce on Wednesday it will end its two-year-old bond-buying stimulus, known as quantitative easing three, as the U.S. economy continues to recover.

Still Fed officials have also stressed they are in no hurry to take policy tightening a step further by raising rates from near zero levels due to subdued inflation and the poor quality of a recovery in labour markets. "I think the markets are greatly underpinned by expectations that the Fed will maintain a dovish stance, which makes me a bit worried about risk of disappointment," said Hirokazu Kabeya, senior strategist at Daiwa Securities.

Upbeat U.S. earnings so far have also eased worries that corporate profits might be squeezed by sluggish growth in the world, especially outside the United States.

With 245 companies in the S&P 500 having reported earnings so far for the third quarter, 73.5 per cent have beat analyst expectations, according to Thomson Reuters. Over the past four quarters, 67 per cent of companies have beat estimates.

Still, Facebook Inc shocked investors after the market close on Tuesday, warning of a dramatic increase in spending in 2015 and projected a slowdown in revenue growth this quarter, slicing a tenth off its market value.

U.S. economic data published on Tuesday was mixed. But a rise in consumer confidence to a seven-year high gave stock bulls enough reason to maintain their optimism on the economic recovery.

Separate data, however, showed new orders for capital goods by U.S. businesses fell the most in eight months in September.

The US dollar traded at 108.12 yen, not far from a two-week high of 108.36 yen hit last week. It had a muted reaction to data showing Japanese industrial output rose 2.7 percent in September, slightly above market expectations.

Casting a shadow on risk sentiment, the U.S. Department of Homeland Security said it was increasing security at government buildings in Washington and other cities because of continuing terror attack threats.