GLOBAL MARKETS-Asian shares up with eye on "fiscal cliff"; yen slips more

* MSCI Asia ex-Japan inches up 0.2 pct

* US set for last-minute scramble to avert "fiscal cliff"

* Nikkei hits 21-month high as yen slips to two-year low vs

dollar

* European shares likely reopen from holidays with a drop

TOKYO, Dec 27 (Reuters) - Asian shares rose on Thursday amid

caution as U.S. lawmakers prepared to resume negotiations to

avoid a fiscal crunch by Dec. 31, while the yen hit a 21-month

low against the dollar on the prospect of drastic monetary

easing and massive state spending.

European shares were seen returning from the Christmas

holiday break with a fall, financial spreadbetters predicting

London's FTSE 100, Paris's CAC-40 and

Frankfurt's DAX would open down as much as 0.6 percent.

A 0.1 percent gain in U.S. stock futures suggested a

firm Wall Street start.

MSCI's broadest index of Asia-Pacific shares outside Japan

was up 0.3 percent, with Australian shares

also adding 0.3 percent. Hong Kong shares rose

0.4 percent to a near 17-month high, although Shanghai

steadied after earlier touching their highest level since July.

In a sign that there may be a way to break the deadlock in

the U.S. Congress, Republican House of Representatives Speaker

John Boehner urged the Democrat-controlled Senate to act to pull

back from the cliff and offered to at least consider any bill

the upper chamber produced.

U.S. President Barack Obama will try to revive budget crisis

talks which stalled last week when he returns to Washington on

Thursday after cutting short his Christmas holiday in Hawaii.

"There is no easy way to resolve the U.S. fiscal cliff, but

there should be a compromise at some point and that's what the

market is looking for," said Tetsu Emori, a commodity fund

manager at Astmax in Tokyo.

Economists warn that the "fiscal cliff" of higher taxes and

spending cuts worth $600 billion could hurl the world's largest

economy into recession, dragging other economies with it.

Such concerns underpinned the dollar as the fiscal impasse

continues to sap investor appetite for risky assets, raising the

dollar's safe-haven appeal.

"Most risk assets will probably remain range-bound until we

get a clearer indication of what to expect from the fiscal cliff

negotiations," said Stan Shamu, a strategist at IG Markets.

There were some signs of economic improvement in the Asian

region, with data showing profits earned by China's industrial

companies jumped 22.8 percent in November from a year earlier,

accelerating from October's 20.5 percent.

London copper rose 1.7 percent to a one-week high of

$7,932 a tonne on the positive data from China, the world's top

copper buyer.

U.S. crude futures inched up 0.2 percent to $91.14 a

barrel on hopes the new Japanese government's policies would

spur demand. Brent crude steadied at $111.03.

However, South Korea warned on Thursday of only a modest

recovery in the economy next year. India's economic growth could

get stuck at 5-5.5 percent if a policy logjam continues, said

Montek Singh Ahluwalia, a key policy adviser to Prime Minister

Manmohan Singh.

YEN SALES ACCELERATE

Against the yen, the dollar at 85.87 yen reached its

highest since September 2010, with investors accelerating their

yen sales after new Japanese Prime Minister Shinzo Abe said his

government would pursue bold monetary policy, flexible fiscal

policy and a growth strategy to encourage private investment.

Abe has pledged to make his top priority beating deflation

and taming the strong yen, which are dragging down the world's

third biggest economy.

The yen is on track for a drop of more than 10 percent this

year, its steepest since 2005. It also fell to a 16-month low

against the euro at 113.65 yen on EBS on Thursday.

The weaker yen, a boon for Japanese exporters, lifted the

benchmark Nikkei stock average 0.9 percent to close at

its highest since March 2011. It is on track to log its best

yearly gain since 2005.

"People are putting on some positions based on what we saw

after the cabinet appointment and LDP policy decision," a dealer

at a foreign brokerage said, referring to the ruling party.

The yen is expected to stay under pressure given the new

government's clear resolve to prevent it rising. Japan's top

government spokesman said recent yen declines were a reversal of

past "one-sided" gains in the Japanese currency.

"I'm still bullish on the dollar/yen quite a bit," said a

trader for a U.S. bank in Singapore. "In this thin market, I

think anything can happen. But definitely I wouldn't go against

the trend. The trend is quite clear at this point in time."

New Japanese Finance Minister Taro Aso said the prime

minister had ordered him to compile a stimulus package without

adhering to the previous government's 44 trillion yen ($519

billion) cap on new bond issuance.

The benchmark 10-year Japanese government bond yield

rose to three-month highs of 0.80 percent, while

lead 10-year JGB futures hit a three-month low of

143.48.

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