Asian stocks rose on Friday as investors tried to shake off weak economic data in the United States and Europe, but lingering caution about riskier assets supported the safe-haven yen.

European shares <.FTEU3> were expected to bounce by as much as 1.3 percent after steep losses on Thursday, with stronger commodity prices expected to help mining and energy stocks.

The euro, under heavy pressure from Greece's fiscal crisis, edged higher as some traders covered short positions heading into the weekend.

Analysts said hopes of strong corporate profits, especially in fast-growing Asia, won out over global growth and sovereign credit concerns on Friday to push stocks higher.

Investors were keenly awaiting a raft of U.S. data later in the day including existing home sales and a second estimate of fourth-quarter GDP, and a second reading on UK fourth-quarter GDP.

Share markets are caught in a tug of war between worries about stimulus withdrawal, sovereign debt and the sustainability of the global recovery on the one hand, and low interest rates and rising profits on the other, said AMP Capital Investors head of investment strategy Shane Oliver.

The MSCI index of Asian shares excluding Japan <.MIAPJ0000PUS> rose 1 percent despite overnight weakness on Wall Street, while Japan's Nikkei <.N225> edged up 0.2 percent, with investors soothed by data showing Japanese factory output rising 2.5 percent in January to meet demand from the rest of Asia.

The shine from the manufacturing report eclipsed Japanese inflation data that showed the world's No. 2 economy was still mired in deflation. That fueled talk that Japan may need more quantitative easing.

In India, the BSE Index <.BSESN> climbed 2.4 percent, helped by gains in bank stocks after the federal budget proposed to provide 165 billion rupees ($3.6 billion) for recapitalization of government-controlled banks.

Yet, price performances so far this year suggest safer assets are still in vogue.

The Nikkei has lost nearly 4 percent since the start of the year, and the Asian MSCI stock index is down 5.7 percent. In contrast, the yen has gained 3.9 percent.

The mood soured further on Thursday after U.S. data showed jobless claims rising. Orders for durable goods also unexpectedly fell, casting doubt about the pace of recovery in the world's biggest economy.

Markets have also been hamstrung by worries that the Greek debt crisis may worsen if Athens suffers credit rating downgrades.

Concerns about fiscal strains in the euro zone's weaker states have pushed the euro to near one-year lows and there were also few signs that selling pressure would ease any time soon.

A Wall Street Journal report said on Thursday some major hedge funds are making substantial bets against the euro as Greece's debt crisis rages.

The euro rose 0.5 percent against the yen from late U.S. trade on Thursday to 121.32 yen, having bounced off a one-year trough of 119.66 yen hit on trading platform EBS on Thursday. But traders said the gains in the euro were largely due to short-covering ahead of the weekend.

Sterling was also on the defensive at $1.5280 after hitting a nine-month low on Thursday, hurt by concerns the UK economy is so weak that it might need more quantitative easing from the central bank.

Sterling really suffered, Barclays said in a note to clients. The euro perhaps performed better than expected given the ongoing gloom over Greece and some very weak numbers.

Barclays said the selling could persist if Britain's second release GDP report on Friday disappoints. Markets forecast the British economy grew just 0.2 percent in the fourth quarter from the previous quarter.

The U.S. dollar stayed under pressure on Friday, with the dollar index <.DXY> dipping 0.2 percent to 80.623.

Commodities benefited from a weaker dollar, but gains were modest.

Oil rose 0.5 percent and gold ticked higher, in part on a report that China would buy IMF gold. But the author of the report later said she did not have official sources for her story.

Underscoring the cautious tone, the yen held on to the bulk of its gains to trade at 121.32 yen, near a one-year peak of 119.66 yen hit on Thursday. U.S. Treasury debt prices also held on to the previous day's steep gains.

(Additional reporting by Victoria Thieberger in MELBOURNE; Editing by Kim Coghill)