* Asia stocks headed for best weekly returns of 2010 so far
* European shares also rise early, eyes on U.S. job data
* Commodities in bull run, anticipating more USD weakness
* Oil, copper hit 2-year highs
* QE2 brings with it confidence and consequences
By Kevin Plumberg
HONG KONG, Nov 5 (Reuters) - Asian stocks rose for a fifth day on Friday, with commodity-related shares helping regional markets outperform other parts of the world this week after U.S. Federal Reserve action revived a move into riskier assets.
Major European stocks followed Asia higher, rising 0.2 percent in early trade ahead of key U.S. jobs data.
The October U.S. payrolls report due later on Friday is expected to reflect growth of 60,000 jobs, which while a relatively small amount would be the first increase since May and probably enough to keep the risk rally going.
The Fed's $600 billion bond-buying scheme unveiled on Wednesday, dubbed QE2 by traders and investors, has resulted in a scramble to buy laggard equity sectors, especially in emerging markets, and commodities.
It has also spurred a shift out of really long-dated debt on bets that the injection of cheap dollars will keep a reflation trade going.
"What QE2 has done is that it added confidence to our view," said Shane Oliver, director of investment strategy and chief economist for AMP Capital in Sydney.
"We further increased our exposure to Asia and emerging markets. QE2 provides more confidence that the flow of capital into emerging markets will continue and add more liquidity into asset markets," said Oliver, who helps manage investments of some $100 billion.
The ultimate consequences of QE2 are clear to many analysts, namely greater risks of capital controls in emerging markets, asset price bubbles and quickening inflation.
For now, though, investors have been putting cash to work in search of higher returns and worrying about the backlash later.
Japan's Nikkei share average led gains in Asian stocks a second day, rising 2.9 percent, with big exporters among the supporting factors for the index.
"Short-covering is the main driver of today's gains, but foreign investors appear to be picking up shares of companies that are sensitive to economic cycles such as trading houses after rallies in oil and gold," said Hiroaki Kuramochi, chief equity marketing officer at Tokai Tokyo Securities in Tokyo.
The MSCI index of Asia Pacific stocks outside Japan was up 0.9 percent, led by 2 percent gains in both the materials and energy sectors
The index is up around 5.6 percent so far this week, on course for the biggest weekly rise since July 2009. For the year to date, it has risen more than 15 percent, with much of the gains made in the last few months.
HIGHER AND HIGHER IN HONG KONG
Hong Kong's Hang Seng index climbed nearly 1.4 percent on strong turnover, extending its rise this week to 7.6 percent, the largest weekly gain since May 2009.
Investors in Hong Kong have been ploughing money into large cap stocks such as HSBC Holdings Plc after focusing on small caps for much of the year, convinced the current rally has staying power.
The U.S. dollar index a measure of its performance against a basket of six other major currencies, held near an 11-month low, while the euro slipped to $1.4191 having risen to the highest since January overnight at $1.4283.
Chronic weakness in the dollar has been a prime factor lifting commodity prices across the board.
Three-month copper futures traded on the London Metal Exchange was up 1.5 percent to the highest since July 2008, having risen an unrelenting 20 percent since August.
Crude oil futures were also in the midst of a bull run, with the December contract up 0.5 percent to $86.88 a barrel December oil may try to hurdle the May 3 high of $87.15 a barrel throughout the global day, above which oil would be at its highest since October 2008.
Gold advanced to a fresh record high of $1,394 an ounce and then speculators took profits, causing the metal to reverse course and fall 0.3 percent on the day to $1,387.96.
Gold is up some 27 percent so far this year, benefiting from inflation hedges and a recurring inverse relationship to the dollar's performance.
Dealers were not convinced the precious metal's run this year was over.
"Once we've got the market doing what it wants to do, you've got to run with it," said Jonathan Barratt, managing director at Commodity Broking Services in Melbourne.
"I think the market is going to say, well, let's look at $1,400." (Additional reporting by Aiko Hayashi in TOKYO and Jun Ebias in HONG KONG) (Editing by Kim Coghill)