(Reuters) -- Asian shares rose on Friday, tracking U.S. stocks which jumped overnight on strong U.S. housing data and earnings, but concerns over the health of European banks weighed on investor risk appetite after Standard & Poor's downgraded Spain's rating.
MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.2 percent, with the technology sector leading the gain with a rise of more than 1 percent.
Seoul shares were among Asia's outperformers, rising on the back of a record $5.15 billion first-quarter profit by Samsung Electronics, which boosted its shares by 2.5 percent to an all-time intraday high of 1.373 million won ($1,210).
Australian shares retreated from earlier gains, as earnings worries in the retail sector and concerns about the European debt crisis set in.
Investors have maintained their cautiousness and that is being played out here today, the Spanish downgrade is filtering across the market, Shaw Stockbroking senior dealer Jamie Spiteri said about the Australian trading.
Japan's Nikkei average were off 0.1 percent.
The euro shed half a cent to around $1.3180 early on Friday after S&P cut Spain's ratings by two notches to BBB-plus due to its deteriorating public finances.
The currency had climbed to a three-week peak near $1.3264 on Thursday. S&P's cut dented riskier currencies such as the Australian and New Zealand dollars early on Friday.
The price action reflects strong market nervousness over the European problem, and that investors have yet to take on risk, said Junya Tanase, chief foreign exchange strategist at JPMorgan Bank in Tokyo.
The focus turns to the Bank of Japan's monetary policy decision due later in the session, with expectations running high that the central bank will take further accommodative steps.
Views remained mixed over what specifically the BOJ would do, with markets generally expecting a combination of options including an increase in the amount of asset purchases and an extension of the maturity of bond purchases.
Markets have priced in an aggressive easing, and if the BOJ opts to just boost asset purchases by 5 trillion yen, as we forecast, it could spur an unwinding of the huge yen short positions and put upward pressures on the yen, Tanase said.
If worries over the European situation intensified, that could also offset yen-selling pressures from the BOJ's further monetary stimulus, he added.
US DATA REASSURES
Thursday's data showing U.S. contracts to purchase previously owned homes stood near a two-year high in March added to economic optimism already spreading following solid earnings and the Federal Reserve's earlier pledge to keep accommodative monetary policy as long as needed.
Copper and oil eased on Friday after rising the day before on a weaker dollar, which boosts demand for dollar-denominated raw materials.
Copper was down 0.4 percent at $8,285 a metric tonne.
U.S. crude futures fell 0.3 percent at $104.19 a barrel after settling at $104.55, the highest settlement since April 2. Brent crude fell 0.3 percent at $119.54 after settling at $119.92 for its highest close since April 13.
Spanish debt downgrade sapped sentiment in Asian credit markets, with the spread on the iTraxx Asia ex-Japan investment-grade index widening by 4 basis points.
BEARISH STORY IN EUROPE
Europe was a different story, with European shares closing little changed on Thursday, pausing after a two-session rally.
Worse-than-expected results by Germany's biggest lender, Deutsche Bank, weighed on euro zone banks, which were also hit by data showing the zone's economic sentiment fell more than expected in April.
Underscoring an urgent task to restore investor confidence in the euro zone's fragile banks, the European Central Bank called on authorities on Thursday to set up a body to manage bank rescues in the euro zone. It came just as European policymakers were starting to see the idea of a rescue fund that would cover all banks in the currency bloc as possibly the only way to stamp out market jitters.
At the same time, a potential crisis was averted when Dutch politicians reached a deal on a 2013 budget on Thursday ahead of a European Union deadline set for next Monday. Its government earlier in the week resigned in a standoff over budget-cutting plans, rattling financial markets by creating a political vacuum in one of the euro zone's few remaining AAA-rated countries.
(Additional reporting by Victoria Thieberger in Melbourne; Editing by Richard Borsuk)