Asian shares hit two-and-a-half-week high, crude rebounds

By Lisa Twaronite

TOKYO (Reuters) - An index of Asian shares climbed to 2-1/2-week highs on Thursday, heartened by gains on Wall Street and a recovery in crude oil prices in thin markets ahead of the Christmas holiday.

European markets are expected to open higher on a half-day of Christmas Eve trading. Financial spreadbetters at IG expected Britain's FTSE 100 (FTSE) and France's CAC (FCHI) to rise 0.1 percent each.

MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) was up 0.6 percent, after U.S. stocks posted their third straight session of gains.

Australian shares (AXJO) jumped 1.3 percent in a shortened holiday session.

But China's blue-chip CSI300 index <.CSI300> and the Shanghai Composite Index <.SSEC> were both more than 1 percent lower after regulators tightened rules for insurers investing in listed firms.

U.S. crude futures (CLc1) added 0.7 percent at $37.77 a barrel while Brent crude futures (LCOc1) surged 1 percent to $37.74. Both had added more than a dollar a barrel on Wednesday in thin trading, a day after Brent had touched its lowest level since July 2004.

"A sharp decline in weekly crude oil inventories also helped reinforce yesterday's rebound but the rally also needs to be set into the context of thinning pre-holiday volumes as traders look at making a start on various end of year book keeping and position adjustments as markets wind down for the long Christmas break," Michael Hewson, chief analyst at CMC Markets in London, said in a note to clients.

"It is these sorts of end of year adjustments that helps explain to some extent why the biggest risers over the past couple of days have come from the sectors that have seen some of the biggest losses year to date."

Japan's Nikkei (N225) erased early gains and slipped 0.5 percent as the yen edged higher in thin trade.

Japanese Prime Minister Shinzo Abe's cabinet approved on Thursday a record fiscal 2016 budget that counts on higher growth and tax revenue to achieve Abe's aim of reviving the economy and reining in public debt.

Minutes of the Bank of Japan's November rate review released earlier in the session showed that many policymakers complained of slow wage and capital expenditure growth, but were optimistic that companies will start to boost spending once emerging economies improve.

Now that this month's U.S. Federal Reserve interest rate hike is out of the way, investors were left to ponder how much tightening the Fed has in store for 2016, as well as the impact of the hike on the rest of the world.

Mixed U.S. data released overnight provided no solid directional clues, as new orders for U.S. manufactured capital goods fell last month while personal income rose, and consumer sentiment hit a five-month high in December.

The dollar index (DXY), which tracks the greenback against a basket of six rival currencies, edged down 0.2 percent to 98.139, below its two-week high of 99.294 set on Thursday last week after the Fed's rate hike.

The dollar slipped about 0.3 percent against the yen to 120.56 yen , down from its Friday high of 123.49.

The euro added about 0.3 percent to $1.0938 .

Spot gold rose 0.4 percent to $1,074 an ounce after languishing for two straight sessions of losses. Gold prices are still down more than 9 percent for the year, weighed by positioning that took place ahead of the Fed's widely-anticipated policy move.