TOKYO: Asian shares rose to 2-month highs on Thursday and the dollar struggled near multi-week lows after weak US economic data added to expectations that the Federal Reserve will delay hiking interest rates.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.9 percent to its highest since mid-August.

Spreadbetters saw the lift for equities being maintained into Europe, forecasting a higher open for Britain's FTSE, Germany's DAX and France's CAC.

Australian shares nudged up 0.7 percent. South Korea's Kospi soared 1.2 percent while Shanghai shares advanced 1.4 percent on latest round of hopes that Beijing would launch stimulus to shore up the economy.

"There seem to be considerable expectations of further economic stimulus, which could mitigate some of deflationary pressures," said Gerry Alfonso, analyst at Shenwan Hongyuan Securities.

Japan's Nikkei pared earlier losses and gained 1.3 percent, brushing off soft domestic data.

Japanese manufacturers' confidence worsened for the second straight month in October and is expected to fade going forward, a Reuters poll showed, adding to lingering fears of a recession and keeping policymakers under pressure to deploy fresh stimulus.

On Wall Street, the Dow lost 0.9 percent and the S&P 500 shed 0.5 percent overnight on Wal-Mart's weak profit forecast and disappointing bank earnings. [.N]

U.S. stock futures rose 0.6 percent in Asian trade on Thursday, suggesting a slightly firmer open later in the day.

U.S. retail sales and producer prices data out on Wednesday were weaker than expected, supporting a building view that the Federal Reserve will delay hiking interest rates until 2016.

"With inflation falling and consumer spending stagnating, it will be very difficult for the Federal Reserve to pull the trigger this year. The economy could regain momentum in November or December but a significant turnaround would be needed to shift market expectations," wrote Kathy Lien, managing director of FX Strategy for BK Asset Management.

European Central Bank Vice President Vitor Constancio said a rate hike by the Fed could have greater global repercussions than in the past because the economy has changed and central banks have little experience of moving away from zero interest rates.

"The truth of the matter is that given the lack of historical precedents on what the impact of a major economy departing from a zero lower bound environment is, market analysts and policy makers do not have much of a choice other than 'learning in real time'," he said in the text of a speech to be given in Hong Kong.

The prospect of a delayed rate hike boosted U.S. Treasuries, which saw the benchmark 10-year note yield fall to a 6-month low of 1.85 percent.

The dollar fetched 119.01 yen after hitting a 5-week low of 118.56 yen. The euro stood near a 7-week high of $1.1489.

The Australian and New Zealand dollars rallied versus the greenback as well with the kiwi flying to a 3-month peak of $0.6846.

As a result the dollar index hovered close to 93.845, its lowest since late August.

The pound traded near a 3-week high of $1.5495 struck overnight, when it soared 1.5 percent on upbeat British employment data.

U.S. crude oil struggled amid lingering concerns of a global supply glut.

Expectations of more Iranian supply following a nuclear deal and concerns that economic worries in China and Europe will weigh on demand have pressured oil this month. [O/R]

U.S. crude was down 0.3 percent at $46.51 a barrel, although a weaker dollar helped slow its decline. Brent fared a little better, edging up 0.2 percent to $49.30 a barrel.