Asian shares and the euro rose on Tuesday as slightly better-than-expected Chinese economic growth data soothed investor worries that the euro zone debt crisis was slowing global activity.

Commodities such as industrial metal copper and commodity-linked currency such as the Australian dollar also rose moderately on signs European woes have not derailed the growth trend in the world's second largest economy, a giant importer of commodities.

China's gross domestic product grew at its weakest in 2-1/2 years in the fourth quarter, slowing to an annual rate of 8.9 percent from 9.1 percent in the previous quarter, but it beat expectations for a 8.7 percent rise.

The slowdown is quite modest, and the overall situation of the Chinese economy is stable, said Hua Zhongwei, analyst with Huachuang Securities in Beijing. According to our field studies, demand for heavy equipment and machinery is recovering, and that is a very good sign for the economy.

MSCI's broadest index of Asia Pacific shares outside Japan rose 1.4 percent, while Hong Kong shares gained 1.6 percent. Japan's Nikkei average was up 0.6 percent at midday.

The euro rose 0.5 percent to $1.2728, moving away from its lowest since late August 2010 of $1.2624 hit on Friday. It also extended gains against the yen to 97.60 yen, having hit an 11-year low near 97 yen on Monday.

The Australian dollar also rose following the Chinese data, up 0.5 percent to $1.0362. London copper was up 0.7 percent at around $8,145 a tonne.

A recovery in risk-taking sentiment warmed Asian credit markets, tightening spreads on the iTraxx Asia ex-Japan investment grade index by six basis points on Tuesday.

Market focus had turned to economic data, shrugging off the latest move by Standard & Poor's to cut a top-notch credit rating on the euro zone's bailout fund, following mass downgrades late last week which stripped France and Austria of their prime AAA ratings.

Chinese data was closely watched for clues to Beijing's policy options including monetary easing to support growth.

EUROPE WEIGHS

Investor sentiment remained pressured by persistent concerns about Europe's ability to resolve its two-year-old debt crisis, with Greece struggling to break a deadlock on its debt-swap talks, keeping intact fears of a default.

The China data is good news as it shows the economy hasn't slowed as much as feared by some, said Yiping Huang, chief economist for emerging Asia at Barclays Capital in Hong Kong, on the Chinese data. But we still have to watch out for risks, including the recession in Europe and China's domestic housing industry correction.

For Europe, market attention will likely switch to the latest ZEW survey due later on Tuesday on the health of the giant German economy.

A recovery in S&P 500 index futures, which began in mid-December as the euro eased against the dollar, shows that positive correlation between EUR/USD and equities is starting to erode, RBC Capital Markets said in a report.

The key take-away here is that the 'risk on/risk off' dynamic may be starting to have less of an influence on markets, with pure 'fundamentals' becoming more relevant as the Eurozone crisis is now infecting core markets, it said.

In the first test of investor appetite for French debt since the S&P rating downgrade, yields on French treasury bills eased marginally on Monday.

The euro zone faces further tests later in the week when France and Spain offer longer-dated debts.

The cost of insuring Italian, Spanish and other euro zone government debt against default rose on the S&P ratings cuts, while a flight to safety pushed shorter-dated UK government bond yields down on Monday.