* Equities boosted by positive data from Germany, France
* Commodities sustain gains on economic optimism
* Australian dollar factors in higher interest rates
* Weak U.S. demand remains a worry
By Umesh Desai
HONG KONG, Aug 14 (Reuters) - Japan's Nikkei share average
<> rose to a 10-month high on Friday after upbeat eurozone
growth data and positive earnings from the world's largest
retailer helped offset gloomy U.S. retail and jobs data,
factors which brought down the dollar.
Commodity prices also got a boost from economic optimism,
while the Australian dollar surged to a 2009 peak as comments
from the Reserve Bank of Australia chief caused markets to
price in a greater chance of an interest rate rise before year
end.
Oil prices rose for the third straight day and copper
prices extended their stunning rally as market hopes for a
robust economic recovery were reflected in a strong Wall Street
finish after U.S. retail giant Wal-Mart's <WMT.N> earnings beat
consensus.
U.S. Treasuries held on to overnight gains after investors
snapped up a record $15 billion auction of 30-year U.S.
government bonds, offsetting fears foreign buyers may demand
higher yields for holding longer maturities.
The stock market rally in Asia, now in its sixth month,
received a further boost after Germany and France, the euro
zone's two biggest economies, both reported 0.3 percent second-
quarter growth, ending their recessions earlier than expected.
"The positive figures out of Germany and France are still a
favourable factor for the market, though such prospects had
been somewhat priced in during the global market rally over the
past month," said Soichiro Monji, chief strategist at Daiwa SB
Investments.
Stock market gains have slowed markedly in recent weeks,
however, on fears that share prices have got too far ahead of
economic fundamentals and look expensive when compared with
weak company earnings forecasts.
The MSCI index of Asia Pacific shares traded outside Japan
<.MIAPJ0000PUS> rose 0.75 percent in morning trade, nearing an
11-month high, before surrendering all of its gains on investor
caution heading into the weekend.
The index has climbed around 80 percent since March 9, when
a global equity rally began.
EURO OFFSETS GLOOMY US
Overnight, the European optimism helped offset gloomy U.S.
jobs and retail data.
Wall Street was also cheered by the second-quarter earnings
and outlook from Wal-Mart Stores Inc <WMT.N> and after news of
bank share purchases by hedge fund manager John Paulson. []
Paulson, who had made a fortune betting against financial
companies after foreseeing the credit crisis -- disclosed that
he had bought large stakes in several banks, including Bank of
America <BAC.N>.
The U.S. Commerce Department reported retail sales fell 0.1
percent in July, defying market expectations of a gain and the
number of workers filing initial applications for unemployment
benefits rose, belying anticipations of a drop.
The negative economic data from the United States brought
down the dollar <.DXY>, which remained weak against the yen in
early trade on Friday.
The dollar was 0.1 percent lower against the yen compared
to late U.S. trading on Thursday at 95.42 yen <JPY=>, after
dipping to as low as around 95.25 yen earlier in the day as
Thursday's dismal data cast a shadow over an anticipated
consumer rebound.
The Australian dollar received a leg-up after an upbeat
assessment of the Australian economy by Australian central bank
Governor Glenn Stevens was taken as a hint that Australia could
be the first major developed nation to raise rates.
Financial markets <RBAWATCH> moved in to price in a 90
percent chance of a quarter percentage point rate rise in
November, from around 72 percent before his comments.
Commodity bulls remained busy with U.S. oil for September
delivery up 0.85 percent at $71.13 a barrel <CLc1>, while
copper traded in Shanghai rose 1.5 percent.
Shanghai's benchmark third-month copper futures <SCFc3> hit
51,280 yuan a tonne in early trade, its highest since early
October last year.
It is on course for its strongest weekly gain in more than
two months, tracking London's rally in the previous session,
but market nervousness is also building over the sustainability
of the stunning surge of the last few days.
