Asian stocks shot to a three-month high on Thursday, building a three-day rally on hopes the U.S. economy has bottomed, while the euro was firm before a European Central Bank meeting at which rates may be cut for the last time in a while.

European stock markets were expected to open as much as 2.9 percent higher, according to financial bookrunners, with investors looking for action from G20 leaders who are meeting in London.

The financial and materials sectors were the biggest boosts to Asian stocks outside Japan. While in Japan, Honda Motor Co <7267.T> shares surged 11 percent and Toyota Motor Corp <7203.T> rose 5.5 percent as investors bet General Motors could avoid a messy failure.

That combined with a pickup in new orders according to a U.S. survey of manufacturing activity and the highest volume of home loan applications since mid January supported a view that the worst for the global economy may have passed.

However, reports showing the world's biggest economy continued to bleed jobs heavily in the last few months tempered optimism about when consumer demand for Asia's exports would recover, containing gains in commodities.

Furthermore, leaders at a G20 summit were divided on the need for more stimulus to support efforts underway already.

U.S. data continues to come in better than anticipated. On the other hand, uncertainty continues over the fate of U.S. automakers, and signs of discord between G20 leaders are deepening, Dariusz Kowalczyk, chief investment strategist with SJS Markets in Hong Kong, said in a note.

Japan's Nikkei share average <.N225> rose 4.4 percent. Honda shares rose to their highest level in over five months and Toyota stock hit a four-month peak.

Reflecting a bullish tone in financial stocks, Mitsubishi UFJ Financial Group <8306.T>, Japan's top bank, jumped 6.7 percent to provide one of the strongest supports to the Nikkei.

Bank stocks were underpinned ahead of expected approval later on Thursday of a relaxation in some U.S. accounting standards, which could lead to a bump in banks' bottom lines.

HSBC stock <0005.HK> climbed nearly 9.5 percent to lead Hong Kong's Hang Seng index <.HSI> up 5.3 percent.

The MSCI index of Asia Pacific stocks outside Japan <.MIAPJ0000PUS> firmed by 4.4 percent, gaining for a third day and up near the highest level since early January. The biggest boosts for the index were financials and materials stocks.

The Nikkei has been an outperformer. A 15 percent gain in the Nikkei since March has outpaced the 11 percent rise in the MSCI all-country world index <.MIWD00000PUS>..

WAITING FOR THE ECB

The euro inched up in quiet trade with dealers waiting for the outcome of a European Central Bank meeting. The central bank is widely expected to cut its policy rate to a record low of 1 percent from 1.5 percent.

Investors are also looking for hints that show to what extent ECB policymakers are willing to dive into quantitative easing -- vast expansion of a central bank's balance sheet to support growth. Both the Bank of England and the Federal Reserve are already well down that road.

The markets are pretty much in limbo ahead of the G20 and the ECB. So I wouldn't expect much in the way of volatile moves ahead of them, said Sue Trinh, senior currency strategist at RBC Capital Markets in Sydney.

The euro was at $1.3276, up around 0.2 percent from late New York, though near Monday's two-week low of $1.3113. The euro was up 0.4 percent at 131.11 yen, but sellers have prevented it from advancing above 132 yen for the last few days.

The Australian dollar continued to draw support from rallying global equity markets and hopes demand for raw materials will slowly return. The currency was up 0.6 percent at $0.7035, closing in on last week's two-month high above $0.7090.

U.S. crude futures rose 1.2 percent to near $49 a barrel as further supply cuts by OPEC in March offset U.S. data showing a higher-than-expected rise in crude stocks.

Government bond markets continued to be ruled by supply concerns. The yield on the 10-year Japanese government bond briefly touched a 3-1/2-month high after the Ministry of Finance disappointed some investors by setting a lower-than-anticipated coupon for an upcoming auction.

U.S. Treasuries were under modest pressure as stock markets climbed, after longer-maturity bonds rose overnight on the Fed's bond buyback schedule.

The 10-year yield edged up to 2.68 percent from 2.65 percent on Wednesday.

Japan Nikkei 225 European union