Asian stocks gained on Thursday, with Tokyo shares hitting their highest in three months, while the dollar edged away from recent peaks on weak U.S. housing data.

European equities are also expected to open higher with Britain's FTSE 100 <.FTSE> seen as much as 0.4 percent higher, according to financial bookmakers, following upbeat earnings from U.S. tech firms. Futures for France's CAC were up 0.3 percent.

Gold prices advanced 1.6 percent to $1,104, adding to the previous day's 1 percent gain spurred by the dollar's retreat and after sliding to a seven-week low on Tuesday. Oil also extended Wednesday's strong rally, rising 1 percent.

The MSCI index of Asia Pacific stocks outside Japan <.MIAPJ0000PUS> rose just over 1 percent, led by Chinese shares, but trading was thinned ahead of the Christmas and New Year holidays.

The Thomson Reuters index of Asia ex-Japan equities was up 0.8 percent <.TRXFLDAXPU>.

Shanghai stocks <.SSEC> jumped 2.6 percent, led by China State Construction Engineering Corp <601668.SS> on news of share-buying by its parent, as prospects for China's economic recovery offset the negative impact of heavy new share supplies.

Despite the market's recent fall, the fundamentals including China's steadily improving economy and prospects for corporate earnings do not justify lingering weakness, said Chen Jiuhong, strategist at Haitong Securities in Shanghai.

We are quite optimistic over the market's trend in the first quarter of next year, he said.

The Xinhua news agency on Thursday quoted Commerce Minister Chen Deming as saying China's retail sales will grow more than 15 percent in 2009, latest sign that the economy is on a brisk recovery path.

Japan's Nikkei <.N225> jumped 1.5 percent to its highest in three months, lifted by high-tech exporters such as Advantest <6857.T> after better-than-expected earnings from U.S. peers.

Investors are welcoming gains in U.S. stocks and stabilizing currency moves. The solid performance of U.S. technology stocks is particularly positive for the tech-heavy Nikkei average, said Yutaka Miura, a senior technical analyst at Mizuho Securities.

U.S. technology shares rose on Wednesday after solid earnings from Micron Technology Inc and Red Hat Inc , but the broader market's gains were capped by the home sales data.

DOLLAR OFF HIGHS

The U.S. currency hovered below a three-month peak against the euro and two-month high on the yen hit earlier this week. The dollar index <.DXY>, a gauge of its performance against six other major currencies, was also sitting below this week's three-month high.

The euro is on course for its biggest monthly fall against the dollar since January and was holding just above its weakest levels since early September after dipping near $1.42 this week. Sales of newly built U.S. single-family homes unexpectedly dropped 11.3 percent last month to a 355,000 unit annual rate, Analysts had forecast an increase to 440,000 units.

The data reminded investors that the path to a recovery will be bumpy, one day after a larger-than-expected jump in sales of existing U.S. homes fueled a market rally.

Investors are awaiting more U.S. data, including the jobless claims due at 8:30 a.m. EST, for a clearer picture on the world's largest economy. Economists in a Reuters survey forecast a total of 470,000 new filings in the week ended December 19 compared with 480,000 in the previous week.

Meanwhile, oil prices rose above $77 after surging more than 3 percent the previous day driven by a weak dollar and U.S. data showing a fall in crude oil stockpiles last week.

U.S. crude for February delivery gained as much as 1 percent to $77.48 a barrel.

(Editing by Kazunori Takada)

Japan United kingdom China Investment