Asian stocks clawed back some of this week's losses on Friday after a solid set of U.S. data calmed turbulence in global financial markets, though underlying worries about slowing world economic growth kept investors on edge.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS gained 0.2 percent, though it is likely to log its sixth straight week of losses with a fall of 0.5 percent so far this week.
The positive mood did not last long in Japanese markets, however, where the Nikkei share average .N225 fell 0.5 percent to 4-1/2-month lows.
Oil LCOc1 and metal prices also recovered some ground.
Helping calm investor nerves was data overnight showing the number of Americans filing new claims for jobless benefits fell to a 14-year low last week USJPB=ECI and industrial output USIP=ECI rose sharply in September after a fall in the previous month.
"We need to see a period of better data from the U.S., and especially Europe, for markets to really calm and volatility to cool," said Chris Weston, chief market strategist at IG Markets in Melbourne.
The reports prompted a relief bounce in many riskier assets that had been battered this week on worries about weakening global growth.
"People still think the U.S. economy is on solid ground. But they don't think it is strong enough to lead the global economy," said Hiroshi Ono, the head of equity investment at Sumitomo Life.
A possible recession in Europe, a floundering economy in Japan, a slowdown in China and the Ebola virus outbreak have all conspired to rattle investors, triggering tumult in financial markets and a bout of volatility not seen in years.
U.S. stocks had another choppy session on Thursday but managed to stay above multi-month lows hit the previous day, with the S&P 500 Index .SPX ending flat.
The Volatility index .VIX, viewed as a gauge of investor fears, eased to 25.2 percent from a 2 1/2 year high above 31 percent hit on Wednesday.
"I expect market volatility to gradually to come down. Loss-cutting trades will come to an end soon after a hectic week and markets will be looking to what kind of policy options major countries can adopt now," said Makoto Noji, senior strategist at SMBC Nikko Securities.
Also helping markets were comments from James Bullard, the head of the St. Louis Federal Reserve Bank. Bullard said on Thursday the U.S. central bank may want to keep up its bond buying stimulus for now given a drop in inflation expectations.
However, as solid U.S. data in recent months ironically does not justify the Fed to keep stimulus in place, most investors expect the Fed will wrap up its bond buying at the end of this month, as scheduled.
The U.S. dollar also recovered, with the dollar index stabilizing at 84.950 .DXY, off a three-week low of 84.472 hit on Wednesday.
"It was largely a cooldown session, spiced up by solid U.S. data and a surprisingly dovish comment from Fed member Bullard," analysts at CitiFx wrote in a note to clients.
The euro gave back some of Wednesday's gains on the greenback to be at $1.2811 EUR=, off this week's high of
$1.2887.
The common currency was undermined by a sharp sell-off in periphery euro zone countries debt.
Greek government bonds were the hardest hit, with 10-year yields rising to nearly 9 percent, while Spain missed its target at a bond auction due to weak demand from investors.
The reversal of money flows into these debt markets raises fresh headaches for European policy makers as they struggle to deal with threat of deflation and recession.
Deflation has already hit five peripheral euro zone countries in September, including Italy and Spain, while a string of surprisingly weak German data showed the euro zone's power house is losing momentum.
After a four-month rout, Brent crude LCOc1 was up close to a dollar to above $86 a barrel.
But the global oil benchmark is still headed for a fourth weekly loss in a row, having fallen to a fresh four-year low on Thursday, as excess supply and weak fuel demand from Europe to China pummeled prices.
There is little in the way of market moving data out of Asia on Friday. Later in the day, European Central Bank member Benoit Coeure speaks on 'Have we learnt anything from the crisis' and Federal Reserve Chair Janet Yellen will speak about 'Economic opportunity' at separate events.
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