By Ian Chua
SYDNEY (Reuters) - Asian stocks rose to three-month highs on Tuesday as investors wagered upcoming Chinese data will add to signs the global economy is stabilising, while receding fears of a U.S. military strike against Syria eased oil prices.
Russia's proposal to work with Damascus to put its chemical weapons under international control could avert planned U.S. action and prompted President Barack Obama to say he saw a possible breakthrough in the crisis.
Benchmark Brent oil prices fell 0.7 percent to $112.88 a barrel, extending Monday's 2.1 percent slide. U.S. crude slipped 0.8 percent to $108.60.
Lower oil prices are usually a positive development for Asia, a region that relies heavily on imports for its energy needs.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.8 percent, extending Monday's 1.3 percent gain to reach highs not seen since early June.
Tokyo's Nikkei climbed 1.1 percent, adding to Monday's 2.5 percent rally as news that Tokyo had won the right to host the 2020 Olympic Games added to optimism about a lasting economic recovery.
"What we're seeing today is a continuation of yesterday's retail-driven euphoria," said Stefan Worrall, director of equity cash sales at Credit Suisse in Tokyo, noting continued rallies for construction and tourism businesses.
MORE CHINA DATA
Further gains will depend on Chinese industrial output and retail sales due around 0530 GMT. Upbeat trade and muted inflation this week have bolstered hopes that a deep slowdown in the world's second biggest economy may have been avoided.
A recent run of encouraging factory activity data from China, Europe and the United States suggested the global economy as a whole was on a firmer footing.
In a slight twist to this narrative, sentiment for emerging markets also found support in disappointing U.S. jobs data for August because it raised doubts about whether the Federal Reserve can scale back stimulus in any significant way next week.
A Reuters poll on Monday showed economists generally expect the Fed to announce a reduction in its massive $85 billion monthly bond-buying programme by a very modest $10 billion.
Such an outcome should be good news for emerging markets, which have suffered from an outflow of funds as investors positioned for a world with less easy money from major central banks.
The MSCI emerging equities index advanced 0.6 percent to three-month highs and has rallied nearly 5 percent in the last five trading sessions.
Still, this may only be a short-term bounce, warned Societe Generale strategist Benoit Anne.
"I don't buy the argument that the global emerging market correction is over. Outflows have been robust over the past few weeks and are showing no signs of reversal," he wrote in a report.
DOLLAR STRUGGLES
The disappointing U.S. jobs data has cast a long shadow on the dollar, which was subdued after two straight days of declines. It wallowed at a 1-1/2 week low against a basket of major currencies, having fallen 1 percent since Friday.
Adding to the uncertainty, San Francisco Federal Reserve Bank President John Williams said on Monday he hasn't made up his mind yet over whether to support a reduction in Fed bond purchases.
The weakened dollar helped the euro recover from last week's selloff sparked by dovish comments from the European Central Bank. The common currency was steady at $1.3258, keeping close to a 1-1/2 week peak of $1.3281 scaled on Monday.
The greenback fared better against the yen, which sagged on Monday as the Nikkei rallied. The Japanese currency has tended to move inversely to the Nikkei this year.
The dollar was flat on the day at 99.58 yen, but down only moderately from a pre-jobs data high of 100.24 set on Friday.
Analysts at BNP Paribas said it was too early to turn bearish on the dollar. "This is more of a temporary setback than a game-changer for USD bulls," they wrote in a note.
They cited Fed tapering risk, the chance of U.S. data surprising to the upside and the possibility of Larry Summers being nominated for the Fed Chairman position as dollar-positive factors.
Summers is seen as more hawkish than Fed Vice Chair Janet Yellen, who is also in the running to be the next Fed chief.
Copper was a touch softer at $7,174.75 tonne, having climbed from last week's trough of $7,082 on optimism about China.
Spot gold was slightly weaker on the day at $1,379.11 an ounce, still in consolidation mode after its late June to late August rebound from $1,180.71 to $1,433.31 fizzled out.
(Additional reporting by Tomo Uetake; Editing by Shri Navaratnam and Eric Meijer)
