Shanghai stocks managed to lead a regional advance on Wednesday as more Chinese figures indicating weakness in the world's number two economy spurred hopes Beijing will unveil fresh measures to spur growth.
The broadly positive mood on trading floors also helped emerging currencies recover slightly against the dollar after rallying since Friday's US jobs data ramped up expectations the Federal Reserve will hike interest rates this year.
Beijing said Wednesday that growth in output from China's factories fell to a six-month low last month and came in below expectations -- the latest in a run of disappointing data this week, following downbeat trade and inflation figures.
But Zhang Gang, an analyst from Central China Securities, told AFP the news raised hopes for more economy-boosting moves by Beijing.
"Now (NYSE: DNOW - news) the market is expecting the government to accelerate reforms and further loosen its monetary and financial policy," Zhang said.
Months of weak readings have put pressure on Beijing to act as it struggles to transform the nation's growth model to a more stable one driven by domestic consumption and away from decades of export reliance and state investment.
Economic growth continues to slow -- at annual levels not seen in a quarter of a century -- despite moves to boost lending, including six interest rate cuts in 12 months and several reductions in the amount of cash banks must keep in reserve.
However, there was a silver lining in retail sales, which grew at their fastest rate since December.
Hopes for another strong reading next month will be high as China marks its annual "Singles Day" sale -- the world's biggest online shopping day -- with e-commerce giant Alibaba saying around $9 billion was spent in the first 12 hours.
Shanghai ended the day in positive territory, as did Tokyo and Sydney, although Hong Kong retreated.
- 'Stocks the wild card' -
Despite ongoing weaknesses in the global economy, the Fed has been widely tipped to increase borrowing costs as it looks to prevent bubbles appearing at home.
Friday's bumper US jobs figures fuelled bets that central bank policymakers will announce a lift-off at their next meeting in December, sending the greenback surging Friday and Monday.
However, Masato Yanagiya, head of foreign exchange and money trading at Sumitomo Mitsui Banking Corp. in New York, said the Fed would likely be studying world markets before making its decision.
"The wild card to the otherwise straight road to a rate hike is stock moves," Yanagiya told Bloomberg News.
"Tumbling stocks would overhaul the scenario of a Fed rate hike and dollar buying. The Fed may not like stock declines and in that sense, it now depends on markets not data."
On Wednesday the greenback dipped against the euro after hitting a six-month high in New York trade. Adding to selling pressure on the single currency are expectations the European Central Bank will further loosen its own monetary policy to try to kick-start the eurozone's torpid economy.
The euro was at $1.0746 Wednesday in Tokyo, from $1.0727 in New York, where it at one point touched $1.0675, its lowest level since late April (LSE: 0N69.L - news) .
The dollar also edged down to 123.05 yen from 123.19 yen.
Emerging market currencies also strengthened for a second day, having been hammered at the start of the week.
Malaysia's ringgit, the Indonesian rupiah and South Korean won were the main winners after being hurt the most on Monday. There were also gains for the Australian and Singapore dollars, as well as the Thai baht.
Europe's main stock markets climbed at the start of trading. London's benchmark FTSE 100 index gained 0.18 percent, Frankfurt's DAX 30 index won 0.10 percent and the Paris CAC 40 added 0.14 percent.
Key figures around 0850 GMT
Tokyo - Nikkei 225: UP 0.1 percent at 19,691.39 (close)
Hong Kong: DOWN 0.2 percent at 22,352.17 (close)
Shanghai - composite: UP 0.3 percent at 3,650.25 (close)
South Korean won/dollar: UP 0.2 percent at 1,154.85 won
Indonesian rupiah/dollar: UP 0.2 percent at 13,597 rupiah
Malaysian ringgit/dollar: UP 0.3 percent at 4.3695