Asian shares rebounded modestly Friday and the euro clung to tentative gains, after brighter corporate news lifted U.S. stocks and debt-ladened Italy was able to fund itself at a bond auction.

But investors remained cautious amid a European debt crisis that appeared no closer to resolution, keeping a lid on equity gains and pushing other riskier assets such a commodities lower.

Tokyo's Nikkei share average <.N225> and MSCI's broadest index of Asia Pacific shares outside Japan <.MIAPJ0000PUS> both rose around 0.5 percent, clawing back some of the losses from a sharp sell-off in the previous session.

U.S. stocks had risen nearly 1 percent Thursday, after drugmaker Merck cheered investors by raising its dividend and network equipment maker Cisco Systems reported earnings that beat analysts' expectations. <.N>

Italy, the latest euro zone nation to find itself in the bond market's crosshairs, moved closer to a national unity government Thursday, while its treasury managed to sell 1-year bills at yields of less than 7 percent -- the threshold that investors believe renders its debt burden unsustainable.

The prospect of Italy buckling under its 2 trillion euro debt load has raised fears over Europe's 2-year-old crisis to a new level, because the euro zone's bailout fund (EFSF) is not big enough to rescue the bloc's third largest economy.

Italy's funding vulnerability presents a serious risk to the global financial system and forces euro zone leaders to grapple with a lose/lose dilemma, wrote RBS macro credit analysts Edward Marrinan and Edward Young in a note.

Leave one of the euro area's largest economies at the mercy of the funding markets or deploy the under-resourced EFSF in an effort to stabilise the country's borrowing costs.

The euro traded around $1.3610, steady on the day and up from Thursday's trough at $1.3481. The dollar eased 0.2 percent against a basket of currencies <.DXY>.

Commodities markets were subdued, with U.S. crude oil easing 0.3 percent to around $97.53 a barrel and gold dipping a similar percentage to about $1,754 an ounce.