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Lingering concerns about Europe's debt woes and the latest credit rating downgrade of Spain underpinned the safety of government bonds, slightly boosting the price of U.S. Treasuries in Asia on Friday while easing Asian credit markets.

China's consumer price index rose 6.1 percent in September from a year earlier, coming within expectations and lending support to views the central bank will keep interest rates on hold.

MSCI's broadest index of Asia Pacific shares outside Japan .MIAPJ0000PUS eased 0.8 percent, but was set for a weekly gain of about 4.7 percent, which would be the largest weekly increase since late March, when the index ended the week up 4.8 percent.

Materials sector led the index lower as concerns grew about weakening demand from the world's No. 2 economy, China, and the broader global economy, but oil and copper recovered earlier with losses partly on technical rebound.

"Concerns about China's demand and doubts over Europe's ability to contain the crisis are somewhat overblown," said Tetsu Emori, a fund manager at Astmax Co Ltd in Tokyo.

China's growth may slow but it will still be high with domestic demand staying solid over the medium-term even if the pace of growth slowed, while Europe has no choice but stand by Greece, he said.

"Investors have undergoing adjustments since the spring, reducing excessive positions, and I feel the markets currently stand at a juncture where players want to confirm the floor and survive the month," he said.

Most analysts still expect China to grow at least 9 percent this year.

The Nikkei average .N225 opened down 0.7 percent after hitting a four-week high on Thursday.

Oil prices recovered after falling on worries about slower demand in the world's second-largest oil consumer China. Brent crude edged up 0.1 percent to $111.23 a barrel and U.S. November crude ticked up 0.01 percent to $84.24.

The most active December copper contract on the Shanghai Futures Exchange edged up 0.2 percent.

EUROPE EYED

Europe is showing signs of accelerating efforts to shore up the euro zone banking sector and limit the damage from the region's spreading sovereign debt crisis, but the cost it would have to pay could pose risks to the single currency and growth.

The region's financial turmoil took a toll on bank earnings, as reduced demand for securities underwriting and acquisition advice eroded earnings of JPMorgan Chase & Co. (JPM.N), the second largest U.S. lender the first major bank to post third quarter results.

Downgrades of sovereign ratings continued, with Standard and Poor's cutting the long-term credit rating of Spain by one notch on Friday.

The euro eased 0.2 percent after S&P downgraded Spain, but it still remained on track for the biggest weekly rally since January.

The European Central Bank said on Thursday that forcing private bondholders to accept losses on euro zone sovereign debt could damage the reputation of the euro, hurt the bloc's banks and encourage volatility on foreign exchange markets.

The ECB's warnings made no specific reference to the debate on increasing previously agreed plans for a 21 percent writedown for banks holding Greek debt.

In its October monthly bulletin, the ECB said downside risks relate especially to financial market turmoil.

Sovereign debt woes have put European government bond yields under pressure, with the ECB having to step into the secondary market to buy after an Italian debt auction on Thursday to cap rising yields.

In Asian credit markets, which have reflected the strain of waning confidence in the financial system, spreads on the iTraxx Asia ex-Japan investment grade index widened again by about 8 points early on Friday, after narrowing sharply the day before by about 17 points.

As investors sought relative safety, prices of U.S. Treasury debt added slight gains in Tokyo Friday, with the benchmark 10-year note up 2/32 to yield 2.1745 percent, compared to 2.1798 percent late in New York on Thursday.

(Editing by Alex Richardson and Kavita Chandran)

China's trade surplus narrowed for a second straight month in September, as both imports and exports were lower than expected, reflecting global economic weakness and domestic cooling.

Shares of JPMorgan Chase Co (JPM.N), the first of the U.S. big banks to release third-quarter results, were off 0.7 percent to $32.96 in premarket after posting third-quarter earnings.

The S&P 500 is up about 12 percent from its intraday low hit last week on Tuesday and had its largest seven-day rally since March 2009.

S&P 500 futures fell 3.8 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures shed 22 points, and Nasdaq 100 futures lost 5.25 points.

Economic data on tap includes weekly U.S. jobless claims, due at 8:30 a.m. (1230 GMT), with economists in a Reuters survey forecasting 405,000 new filings compared with 401,000 in the prior week.

Also at 8:30 a.m (1230 GMT), the Commerce Department releases data on August international trade. Economists in a Reuters survey forecast a $45.8 billion deficit compared with a $44.81 billion deficit in July.

Google (GOOG.O) is reporting third-quarter earnings after the close and investors will be looking to see how the slowing economy is impacting its advertising business.

A report on Wednesday that Akamai Technologies Inc (AKAM.O) was close to being acquired by Google has no merit, a person familiar with the matter said. Akami shares were up 4 percent to $24.30 in premarket trade.

The CEO of AOL (AOL.N) Tim Armstrong has been pushing the idea of a sale to Yahoo (YHOO.O) to top shareholders, which could see the company save $1.5 billion, according to sources with knowledge of the discussions.

Pratt & Whitney, a unit of United Technologies Corp (UTX.N) has agreed to buy Rolls-Royce Holding's (RR.L) share of the International Aero Engines consortium in a $1.5 billion deal.

Bloomberg reported, citing people with knowledge of the matter, that DuPont Co (DD.N) is seeking buyers for its polyester-film joint venture as well as its powder-based paint business.

European shares slipped in choppy trading in the morning, after recent strong gains, with mining stocks among the biggest casualties after Chinese trade data was weaker than expected. .EU

* Asian shares rose on growing optimism that Europe will take concrete steps to contain the region's debt woes and head off a systemic banking crisis

* U.S. stocks rose on Wednesday as Europe's progress toward bolstering its financial rescue fund brought more battle-weary investors back into the market.

(Reporting by Chuck Mikolajczak; Editing by Chizu Nomiyama)

Strengthening investor confidence in the euro zone underpinned the single currency, while receding concerns about the banks' problems threatening the wider financial system sharply tightened Asian credit markets.

"Markets are feeling better. The sense is that things are beginning to be put in place, bondholder haircuts, bank recapitalizations and the EFSF expansion," said a Singapore-based trader with an Asian bank referring to the two-year old euro zone debt crisis.

MSCI's broadest index of Asia Pacific shares outside Japan .MIAPJ0000PUS rose 1.1 percent, following a 1.4 percent gain in the MSCI world equity index .MIWD00000PUS, which posted an increase for the sixth session in a row on Wednesday.

The Nikkei average .N225 rose 1.15 percent on Thursday to a four-week high, with shares of major exporters such as Sony Corp (6758.T) rising as players bought their shares back on tentative signs of progress in the European debt crisis.

In a sign some stability and risk appetite may be returning, the overall market volatility as measured by the VIX index .VIX, Wall Street's so-called "fear gauge," has hovered around 30. The level, pulling back sharply from crisis-like levels near 50 hit in August, suggested investors are less inclined to seek protection in stock index options against an equity market slide.

In credit markets, that had been feeling the strain of waning confidence in the financial system in recent months, spreads on the iTraxx Asia ex-Japan investment grade index narrowed by about 15 points.

But the move is likely an adjustment to a recent over-sold condition and the markets were not yet out of the woods, some analysts say.

"The Vix still remains at an elevated level and the recent decline is merely a rebound from an excessively pessimistic view in the markets," said Junya Tanase, chief strategist at JPMorgan Chase in Tokyo.

"Rather than a sign of a full-fledged risk-on returning, it is just an evidence of a slight easing of risk aversion sentiment."

The euro stayed bid early in Asia on Thursday, having jumped to a near one-month high on the dollar as Europe took a step closer to shoring up its financial rescue fund.

Lawmakers in Slovakia struck a deal on Wednesday to ratify a plan to bolster the euro zone's rescue fund by Friday, effectively ending a crisis that had threatened the currency's main safety net. Slovakia is the only country in the 17-nation bloc left to approve the revamp of the fund.

Adding to the sense of urgency, the President of the European Commission, Jose Manuel Barroso, said Europe needed to take decisive action on Greece and outlined a broad plan to contain the debt crisis.

As European officials step up efforts to provide a more specific roadmap to resolve its debt woes and recover investor confidence, the European Union is expected to announce a bank recapitalization plan designed to cushion the impact any default by Greece could have on the region's banks.

Germany and France, the leading powers in the bloc, have promised to propose a comprehensive strategy to fight the debt crisis at an EU summit on October 23.

Oil prices fell on Thursday, with Brent crude futures down 0.2 percent at $111.10 a barrel after rising the day before for an 11.6 percent gain over six sessions. U.S. crude futures fell 0.8 percent to $84.89 a barrel, after snapping a five-session streak of higher closes on Wednesday.

China's trade surplus narrowed in September for a second month in a row as growth of exports and imports both fell below forecasts, reflecting global economic weakness. Exports rose 17.1 percent last month from a year ago, slowing from a 24.5 percent gain in August, and imports increased 20.9 percent, compared with August's 30.2 percent rise.

Hong Kong's benchmark Hang Seng Index .HSI rose 1.5 percent while the Shanghai Composite .SSEC was up 0.4 percent.

(Additional reporting by Umesh Desai in Hong Kong; Editing by Alex Richardson)