* Asia stocks rise modestly; Japan extends outperformance in Nov
* Shares of Li & Fung, supplier to Wal-Mart, hit record high
* Higher yields supporting U.S. dollar (Adds Europe opening, updates prices)
By Kevin Plumberg
HONG KONG, Nov 25 (Reuters) - Asian stocks rose from 1-1/2-month lows on Thursday, with buying focused in the tech and retail sectors on hopes for a busy U.S. shopping season, though the falling Australian dollar was an indication of investors' reduced willingness to take risks.
Major European stock markets saw modest early gains, with
the FTSEurofirst 300 opening up 0.2 percent and
London's FTSE 100 up 0.1 percent . U.S. stock index
futures
The euro was stuck near a two-month low on fears about the next fiscal domino to fall in Europe, even after Ireland hatched a plan to shore up its finances, with the single currency poised for the largest monthly decline against the dollar since May.
A rare bit of good news on the U.S. labour market overnight sparked hopes the holiday season would result in big sales for Asia's exporters, though other factors such as the closing window on Hong Kong's once red-hot IPO market were signals that equity markets may have topped out for the year.
More than $3 billion worth of proposed IPOs in Hong Kong were deferred, while Hongkong Electric Holdings Ltd put off pricing its 10-year dollar bond until next week. [ID:nTOE6AN01S]
"Usually, if there is a lot of hot money coming to Hong Kong, these IPOs should be doing well," said Belle Liang, research head at Core Pacific-Yamaichi. "IPOs are being delayed or withdrawn because of lacklustre demand."
Japan's Nikkei share average closed 0.5 percent higher , extending what has been a surprising outperformance this month compared with the rest of the region.
The Nikkei has risen 9.5 percent so far in November, and with three more trading days to go in November is on track for the best performing month since March.
The MSCI index of Asia Pacific stocks outside Japan is down 0.7 percent in November.
The index was up 0.4 percent on the day, largely driven higher by 1 percent gains in the technology and consumer discretionary sectors.
Hong Kong's Hang Seng index rose 0.4 percent , supported by a 5.7 percent pop in shares of Li & Fung , an exporter that supplies Western retailers such as Wal-Mart and Target.
Li & Fung stock hit a record high and was trading at 1.7 times its average volume of the past 30 days, one of the busiest stocks in the index.
For the most part, the near-term outlook for emerging Asian stocks was to a large extent dependent on how policymakers respond to inflationary pressures.
"With growth above potential in many emerging markets, particularly in Asia, the risk of broad-based inflation is real and growing," Goldman Sachs analysts said in a note.
"And, as policy responds to this in the form of rate hikes or nominal currency appreciation, equities -- stuck between the pull of growth and the push of tightening policy -- are likely to have a bumpier ride."
The Thanksgiving holiday in the United States will keep trading activity limited on Thursday. Friday, the day after Thanksgiving, is traditionally the busiest U.S. shopping day of the year.
The need for liquidity has not necessarily benefited U.S. Treasuries, though higher yields have been a draw to the dollar.
After poor auctions of mid-maturity debt, the U.S. 5-year yield hit a two-month high of 1.59 percent overnight, having now risen more than 50 basis points since the most recent Federal Reserve meeting.
Meanwhile, the U.S. dollar index , a measure of its performance against six other major currencies, was up 0.1 percent, heading back up to 80.00, a level that was test overnight when the index hit the highest since Sept 24.
The high-yielding Australian and New Zealand dollars were underperformers among G10 currencies on Thursday. Uncertainty about what measures China may take to pull down inflation has haunted these currencies.