Asian shares rose to a three-month high on Thursday after a drop in Chinese consumer inflation left room for further policy easing, while Australia's labour market improved.
The new indicators were published against a backdrop of guarded investor optimism for decisive official action to tackle the euro zone debt crisis.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.7 percent, extending gains for a fourth session in a row. Australian shares extended gains to 0.3 percent from around 0.1 percent after data showed employment rose and the jobless rate ticked down in July.
China's annual consumer inflation fell to a 30-month low of 1.8 percent in July from June's 2.2 percent, while the producer price index dropped 2.9 percent in July from a year earlier.
"This number gives more room for policy easing. It is now pretty clear that CPI will likely be below the official 4 percent target for the year, so the policy focus for the government can stay clearly on growth," said Zhang Zhiwei, chief China economist at Nomura in Hong Kong.
Japan's Nikkei stock average erased earlier losses to rise 0.6 percent.
South Korea's central bank kept interest rates steady on Thursday as widely expected to assess the impact of last month's surprise cut, but investors continue to price in another reduction soon to shore up Asia's fourth-largest economy.
The Bank of Japan is also expected to stand pat when it concludes its two-day policy meeting on Thursday.
Vague hopes
Markets have been supported over the previous three sessions by hopes the European Central Bank will start buying sovereign bonds to lower borrowing costs for Spain, and the Federal Reserve will expand its monetary easing, despite a lack of comments or data supporting such views, and suggestions from the authorities that any steps were not likely to be taken before September.
The euro inched up 0.1 percent to $1.2380, but still capped below a one-month high of $1.2444 hit on Monday. The Australian dollar edged up 0.3 percent to $1.0590, helped by the solid jobs figures that fortified views the central bank will stand pat for now.
"The euro, while there are risks, has been supported by the notion that something will be done (about the debt crisis) regardless of the time it may take," said Hiroshi Maeba, head of FX trading Japan for UBS in Tokyo.
As euro short-covering had been completed, the currency was expected to stick to narrow ranges until fresh factors emerged, Maeba said.
While he believes the Australian dollar may be approaching a near-term top after rallying to its highest since March earlier this week, it could continue to draw support from the country's relatively high yields compared to countries where yields are negative.
Oil firmed after ending mixed on Wednesday. Brent was little changed at $112.16 a barrel on Thursday while U.S. crude futures rose 0.2 percent to $93.54 a barrel.
Data on Wednesday showed the adverse impact from the euro zone's three-year debt crisis has spread to the region's core economies, with German industrial output falling more than expected in June, as German imports and exports fell too.
In France, another core euro zone member, the central bank said the economy was likely to slip into a shallow recession in the third quarter.
Spain was spared further negative news when ratings agency DBRS on Wednesday stopped short of cutting Spain and Ireland's debt below a European Central Bank trigger for extra charges to banks using the countries' bonds as collateral.
DBRS is the last of the four agencies used by the ECB to keep the sovereigns at the A level.
Asian credit markets were resilient, with the spread on the iTraxx Asia ex-Japan investment-grade index tightening by 2 basis points and hovering near a four-month low.
