Asian shares gain on global recovery outlook TOKYO (Reuters) - Asian shares advanced on Wednesday as investor confidence in the global economic outlook strengthened on solid U.S. data, giving comfort to investors ahead of the U.S. Federal Reserve's monetary policy decision due later in the session. Optimism over economic recovery from strong U.S. housing data and China's promising economic growth forecast for 2013 raised expectations for robust demand for fuel and industrial commodities, underpinning oil prices and lifting copper. European markets are seen pausing after hitting two-year highs, with financial spreadbetters predicting London's FTSE 100 .FTSE, Paris's CAC-40 .FCHI and Frankfurt's DAX .GDAXI would open nearly flat. A 0.1 percent drop in U.S. stock futures suggested a cautious start on Wall Street. .L.EU.N The MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.4 percent, after rising to near a 18-month high, building on the previous day's 1 percent rally. Gains were led by a 1 percent rise in the energy sector .MIAPJEN00PUS. London copper added 0.5 percent to $8,146.50 a tonne after hitting $8,159, its highest since January 11, while U.S. crude oil held steady around $97.56 a barrel after rising over 1 percent on Tuesday on expectations of higher demand. Brent inched up 0.1 percent to $114.45. <O/R> Shanghai rebar steel futures climbed more than 1 percent to their highest since May on views demand from top steel consumer China will pick up after a week-long holiday in February. "Sentiment has changed this year, with signs of stabilization in the euro zone, a U.S. economic recovery and a shift to a new Chinese political regime removing obstacles which had stood in the way of investors taking risks last year," said Xiao Minjie, an independent economist based in Tokyo. Domestic demand holds the key this year. Beijing's drive to urbanize inner China will boost infrastructure spending while Southeast Asia will also likely see expansion in domestic demand accelerating," he said. Commodity-reliant Australian shares .AXJO inched up 0.2 percent to a fresh 21-month high, with rising copper prices bolstering top miners. It was the 10th straight day of gains, the longest winning run since October 2003. The bar is set almost embarrassingly low for the vast majority of key macro indicators for the U.S., and anything mildly positive is serving to feed more buying enthusiasm. The prevailing market psyche is easily pleased," said Tim Waterer, senior trader at CMC Markets. Hong Kong shares .HSI jumped 0.8 percent and Shanghai shares .SSEC rose 0.3 percent. Japan's Nikkei stock average .N225 soared 2.3 percent to a fresh 33-month high, partly due to a weaker yen. .T The 10-year U.S. Treasury yield rose to as high as a nine-month high of 2.021 percent in Asia on Wednesday. "A big question is whether the Fed is still cautious on the economy following recent improvements in Europe and U.S. fiscal cliff talks," said Hiroki Shimazu, fixed income analyst at SMBC Nikko Securities, adding that a more optimistic Fed economic assessment could pressure Treasuries. The Fed ends a two-day policy meeting on Wednesday, and few market watchers expect any near-term shift in its current, very accommodative stance. But investors will focus on the statement for any clues to the Fed's thinking on if and when it might pull back from its aggressive easing stimulus. The minutes from the December meeting, released earlier this month, hinted at uneasiness within the Fed around its asset-buying program and sparked a sell-off in Treasuries and lifted yields up out of ranges. Morgan Stanley said in a research note that global stimulus efforts and structural reallocation paved the way for a sustained period of asset-price reflation. "This has three implications: Reflation would lend support to higher-yielding emerging markets assets, safe-haven assets would continue to weaken, and expectations about emerging markets policy would likely shift," it said. The yen stayed pressured, with the Bank of Japan set to pursue strong monetary easing as Prime Minister Shinzo Abe's administration pushes for radical reflationary policies to end stubborn deflation. The dollar rose 0.2 percent to 90.93 yen, near its highest level since June 2010 of 91.32 reached on Monday. The euro gained 0.2 percent to 122.66 yen, not far from 122.91 also touched on Monday, its highest point since April. The prospect of continued weakness in the yen and rising risk appetite lifted the Australian dollar to four-year highs on the yen and New Zealand dollars hovered near a four-year high against the yen. Aussie rose as high as 95.34 yen while Kiwi rose as high 76.27 yen, close to 76.37 set Friday, its strongest since 2008. The euro traded at $1.3496, a tad below Tuesday's 14-month high of $1.3498. Asian credit markets underperformed the region's equities as the spread on the iTraxx Asia ex-Japan investment-grade index widened by 2 basis points on an increase in new issues and some caution before the Fed's statement. Additional reporting by Miranda Maxwell in Melbourne, Gyles Beckford in Wellington and Hideyuki Sano in Tokyo; Editing by Eric Meijer & Kim Coghill