Asian shares, the euro and crude oil rose on Thursday as encouraging manufacturing data soothed fears about the global economic fallout from the euro zone debt crisis, with a drop in European government debt yields also supporting sentiment.

MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> climbed as much as 1.3 percent to a five-month high of 438.52, with Australia and China leading the gains.

Japan's Nikkei average <.N225> rose 0.8 percent, despite a system glitch which suspended trading of some major blue-chip shares. <.T>

U.S. factory activity expanded at its strongest pace in seven months in January and Germany's manufacturing sector grew for the first time in four months, while China's manufacturing output was slightly better than expectations, suggesting the world's second-largest economy would achieve a soft landing.

PMIs in the U.S., China, Germany are more resilient than expected, encouraging heavy money to finally step in as the holy combination of PMIs above 50 and loose monetary policy means buying risk, said Sebastien Galy, strategist at Societe Generale.

The euro inched 0.1 percent higher to $1.3180, having reached a high of $1.32187 on Wednesday.

RISK-ON?

The Australian dollar, seen as a gauge for risk appetite, hit a five-month high of $1.0758 on Thursday, buoyed by a record trade surplus for 2011 as the resource-rich country benefited from exporting gold and coal.

A firmer euro supported bullion, lifting spot gold up 0.4 percent to $1,751.30, its highest in nearly two months.

The recovery in risk appetite weighed on the dollar, keeping

its index measured against key currencies <.DXY> near an eight-week low of 78.623 hit on Wednesday. The dollar also hung near a three-month low of around 76 yen touched the previous session.

Risky assets and cyclical currencies are reacting positively to resilient activity in China, signs of stabilisation in Europe, and the ongoing recovery in the U.S., analysts at Barclays Capital said in a research note.

They noted that January saw a rise in virtually all asset classes, due in part to investors buying back assets they spent most of 2011 selling.

Risks in the euro area have not disappeared, however, posing a threat to the rally: A clear resolution on Greek restructuring remains elusive, the analysts said.

Greece has yet to finalise a deal on the long-awaited debt swap with its private bond holders which is vital to securing a bailout from global lenders to avoid a default.

Greece's prime minister will urge the country's political leaders in the next few days to seek backing for more austerity after the International Monetary Fund warned this was key to securing the new bailout Athens needs to avoid a messy default.

Bankers said the bond swap deal, which will mean real losses of about 70 percent for Greek bond holders, is essentially done. But the second bailout and any official sector participation must be agreed before announcing a deal as all elements are interlinked.

Optimism that the euro zone debt crisis may avoid taking a turn for the worse revived some demand for the region's sovereign debt, sending yields down for some highly indebted countries which had recently been shunned by investors due to concerns about their funding ability.

Yields on Portuguese, Spanish and Italian debt fell and the easing tension helped ease pressure on European interbank lending rates, which had already been helped by the European Central Bank's commitment in December to keep abundant funds in the system.

But in Japan, bond prices fell on Thursday ahead of a key auction after a media report said a top Japanese bank has drawn up a contingency plan to deal with a sharp decline in government bond prices.

The report underlined fears that such a drop coul be on the horizon. Government debt yields have stayed compressed despite growing global scrutiny over high sovereign debt levels.

Asian credit markets turned positive, with spreads on the iTraxx Asia ex-Japan investment grade index narrowing sharply by 9 basis points.

North Sea Brent crude oil futures rose 40 cents to $111.96 a barrel.

(Additional reporting by Ian Chua in Sydney; Editing by Ed Davies & KIm COghill)