Asia shares rally, but on track for worst quarterly loss in four years

By Shinichi Saoshiro and Nichola Saminather

TOKYO/SINGAPORE (Reuters) - Asian stock markets rallied on Wednesday after sliding to 3-year lows, but concerns lingered over slumping commodities prices and China's cooling economy.

European markets were set to follow Asia higher, with financial spreadbetters expecting Britain's FTSE 100, Germany's DAX and France's CAC 40 to open as much as 1.2 percent higher.

U.S. stock futures rose 0.8 percent, suggesting a stronger opening on Wall Street later in the session.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.6 percent after plumbing its lowest since June 2012 on Tuesday on fears that China's slowdown would curb its huge appetite for commodities and resources.

The index was on track for a 2.9 percent decline in September, extending losses for the quarter to 17.7 percent, its worst quarterly performance in four years.

Japan's Nikkei brushed aside an unexpected drop in the country's industrial output to close up 2.7 percent, paring losses for the quarter to 14.1 percent, its deepest since 2010.

"The current environment represents a winding back of the overly bullish expectations of both commodity demand and Chinese growth – to a more balanced expectation of progressive, not exponential, growth," said Angus Gluskie, managing director of White Funds Management in Sydney.

Demand for the safe-haven yen eased as global stocks steadied and some semblance of calm returned to markets, but traders said month-end and quarter-end flows meant that volatility is likely to remain a feature.

The dollar index against a basket of major currencies edged up 0.2 percent. The dollar fetched 119.96 yen, having turned around from a low of 119.24. The euro slipped 0.1 percent to $1.1231.

Commodity currencies languished, with the Canadian dollar slipping 0.1 percent to an 11-year low of C$1.3407.

Traders said U.S. nonfarm payrolls data on Friday could help strengthen, or weaken, the case for the Federal Reserve raising U.S. interest rates before the end of the year, thus setting the tone for the dollar.

The market will also be keeping an eye on Fed Chair Janet Yellen, who is due to give welcome remarks at a conference later on Wednesday.

And commodities and global financial markets face a major test of nerves on Thursday, when the closely-watched Chinese Purchasing Managers' Index (PMI) is likely to show the country's factory sector shrank for the second month in a row in September.

China's CSI300 climbed 1.2 percent, helping reduce losses for the quarter to 28 percent. The Hang Seng's 1.7 percent gain also helped shrink losses to 20 percent for the quarter.

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South Korea's Kospi reversed earlier losses to end the day 1 percent higher, paring losses to 5.4 percent for the quarter.

Australian shares closed up 2.1 percent, for a quarterly decline of 8 percent.

"Global equities are closing in on their worst quarter since 2011, with a number of factors fuelling fears in an already jittery market, including weak global growth, driven by deceleration in emerging markets, particularly China," strategists at Barclays (LONDON:BARC) wrote.

"We recommend overweight positions in Japanese and European equities."

Investors drew some relief as mining and trading giant Glencore (LONDON:GLEN) recovered 16.9 percent overnight having fallen to a record low at the start of the week on concerns over the company's ability to withstand a prolonged decline in metals prices.

Benchmark three-month copper on the London Metal Exchange rose 0.9 percent to $5,013 a tonne, compared with a six-year low of $4,855 hit in August.

Prices of other industrial metals like aluminum and zinc also halted their recent routs overnight.

Crude oil futures dipped after U.S. inventories showed a weekly buildup that far exceeded analysts' expectations.