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Asian shares look set to advance, oil prices eye $50

Visitors looks at an electronic board showing the Japan's Nikkei average at the Tokyo Stock Exchange (TSE) in Tokyo, Japan, February 9, 2016. REUTERS/Issei Kato

By Hideyuki Sano

TOKYO (Reuters) - Asian shares look set to extend their recovery from 12-week lows on Thursday after renewed optimism on European banks' prospects and a rise in oil prices to near $50 a barrel helped lift global shares.

Australian share futures (YAPcm1) rose 0.6 percent overnight, while U.S.-traded Nikkei futures <0#NIY:> point to a gain of 1.0 percent in Japanese shares (.N225).

MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> looks set to extend its rebound from Tuesday's 12-week low, after having risen 1.2 percent on Wednesday.

Share prices have risen solidly since Tuesday, with MSCI's broadest gauge covering 46 markets <.MIWD00000PUS> rising 1.97 percent in the last two days to a three-week high.

European banks <.FTE3X8350ECR> were leading the gains with rise of 6.8 percent in the last two sessions, benefiting from a decision by euro zone finance ministers to unlock new funds for Greece and to give it a firm offer of debt relief.

On Wall Street, U.S. S&P 500 Index (.SPX) rose to 2,091, highest in almost a month and near its six-month intraday high of 2,111.

Energy stocks outperformed on the back of continued recovery in oil prices, which hit seven-month highs after the U.S. government reported a larger-than-expected drop in crude inventories. [O/R]

Global benchmark Brent futures (LCOc1) rose to as high as $49.96 per barrel, the highest level since early November, and last stood at $49.78.

U.S. West Texas Intermediate (WTI) (CLc1) hit $49.75, a seven-month high.

The rally in risk assets came even as investors readied themselves for monetary tightening by the U.S. Federal Reserve as early as next month.

The yield on two-year U.S. notes rose to a 10-week high of 0.938 percent (US2YT=RR) as investors priced in the likelihood of the Fed raising its federal funds target rate to 0.50-0.75 percent from the current 0.25-0.50 percent in coming months.

Earlier this month, the two-year yield fell to as low as 0.686 percent.

For now, market players will be looking to comments by Fed Chair Janet Yellen at a Harvard University event on Friday, though many also say her speech scheduled for June 6 - after new U.S. payrolls data comes out - would be even more crucial.

U.S. interest rate futures <0#FF:> are pricing in about one-third chance of a rate hike in June and about 60 percent likelihood by July.

The prospects of higher U.S. interest rates undermined the attraction of gold (XAU=), which fell to a seven-week low of $1,217.90 per ounce and last stood at $1,222.40.

In the currencies, sterling rose to $1.4700 (GBP=D4), near its four-month peak of $1.4770 hit earlier this month, as several bookmakers widened the odds on a British "Brexit" from the European Union after opinion polls showing the "in" camp leading. [GBP/]

The dollar was supported by U.S. rate hike expectations, while the euro (EUR=) stood at $.1151, having hit a 10-week low of $1.1129 overnight.

The dollar fetched 110.19 yen (JPY=), edging nearer a three-week high of 110.59 hit last week.

(Reporting by Hideyuki Sano; Editing by Eric Meijer)