Asian stocks climbed to a 10-month high on Thursday led by energy shares, though some investors wondered if upward momentum from corporate earnings reports justified increasingly pricey valuations.

Major European stock market futures edged up, indicating a slightly higher open after the FTSEurofirst 300 index <.FTEU3> closed at a 2009 high on Wednesday. U.S. stock futures were up 0.4 percent.

The U.S. dollar hovered close to a seven-week low and the yen was being sold off, with traders basically tracking equity markets as a gauge of investor penchant for risk taking.

The four-month rally in global stock markets has put pressure on both currencies, which acted as havens throughout the financial crisis.

The latest batch of U.S. corporate results have been mixed, with solid earnings from Apple Inc and Starbucks Corp enough to boost the Nasdaq for an 11th straight day, while results from Morgan Stanley were disappointing.

Still, the pace of positive revisions to earnings estimates as well as bullish economic signals have investors increasingly optimistic about developing Asia's growth prospects.

Emerging East Asia could see a V-shaped recovery, with growth dipping sharply in 2009 before regaining last years pace in 2010, said Jong-Wha Lee, chief economist with the Asian Development Bank, said in a report.

However, the ADB report said policymakers should plan exit strategies to unwind policy stimulus to avert inflation expectations, but not yet implement them.

Hong Kong's Hang Seng index was the top gaining market in the region. After a 1.3 percent dip on Wednesday, the index was up 2.3 percent <.HSI>, with property stocks and resource-related names among the high flyers. Asia's top oil refiner, Sinopec <0386.HK>, jumped 3.9 percent.

Some investors were beginning to question whether equity prices reflected fundamentals, especially in hot industries. For example valuations of real estate stocks in Hong Kong on the basis of 12-month forward price-to-earnings have been above the 5-year average since May, according to I/B/E/S estimates.

Japan's Nikkei share average <.N225> ended 0.7 percent higher as strength in high-tech firms such as Kyocera Corp <6971.T> offset weakness in domestically-oriented companies like KDDI <9433.T>.

Since hitting a two-month low on July 13, the index has rallied 8.2 percent.

The MSCI index of Asia Pacific shares outside Japan <.MIAPJ0000PUS> was up 0.9 percent, with gains in the energy sector leading the broader market. Since July 13, the MSCI index has climbed 13 percent and it reached its highest level on Thursday since last September.

The market has had a good run ... and a number of people have been suggesting things are getting a little bit expensive, said Martin Angel, dealer at Patersons Securities Ltd in Australia.

RISK-SEEKING BIAS

Over the next month, oil companies around the world will be reporting their quarterly results.

Oil prices shed early losses and turned slightly higher, though the outlook for energy demand from the world's biggest consumers remained uncertain. U.S. crude for September delivery rose 0.15 percent to $65.50 a barrel, while Brent also climbed 0.25 percent to $67.38.

The U.S. dollar was under modest pressure, with stocks showing resilience in Asia.

The relationship between the dollar and global equities has been strong since March, when investors began to cut their holdings of cash and other safe havens and increased exposure to stocks and other relatively risky assets.

The correlation on a 120-day basis between the ICE Futures U.S. dollar index <.DXY> and the MSCI all-country stocks index <.MIWD00000PUS> is at -0.93, the tightest level of the year.

The overall bias is toward risk-seeking, as the stock markets have shown a strong run-up and the Fed has clearly stated it will continue its easy policy, which was a relief for the market, said Tsutomu Soma, a senior manager of foreign securities at Okasan Securities in Tokyo.

The euro rose 0.3 percent to $1.4248, with the near-term upside target the June 3rd high of $1.4337.

The yen, another common haven, was sold off. The dollar actually rose 0.88 percent to 94.40 yen, and the euro was up 1.2 percent to 134.45 yen.

Japanese government bonds crept up, despite the rise in equities, as investors focused on bargains rather than sensitivity to risk.

The 10-year JGB futures rose 0.12 point, after touching a three-week low on Wednesday.

The yield on the 10-year U.S. Treasury note ticked up 1 basis point from Wednesday to 3.56 percent after climbing about 7 basis points overnight on expectations of abundant new supply in coming days.

(Additional reporting by Simone Giuliani in MELBOURNE and Aiko Hayashi in TOKYO)

Japan Australia Investment Apple inc.