By Stella Qiu

SYDNEY (Reuters) -Japanese and Australian shares hit fresh record highs on Friday as a key U.S. inflation reading came in as expected, a relief for investors that had looked for a June rate cut, while mixed data from China bolstered hopes for more policy support.

Europe is set to open higher, with both EUROSTOXX 50 futures up 0.5% and gaining 0.6%. U.S. futures gained about 0.2%.

The index jumped 1.9% to hit a fresh all-time high, extending a surge of 7.9% the previous month when it breached levels last seen in 1989. Australia's resources-heavy shares rose 0.6% to a new record high.

MSCI's broadest index of Asia-Pacific shares outside Japan also gained 0.2%, although it was still set for a weekly loss to 0.4%.

Data on Friday showed China's factory activity contracted for a fifth straight month in February, while the expansion in the services sector picked up pace, highlighting an uneven recovery for the world's second-largest economy.

That fed hopes of more policy support from Chinese policymakers at the annual parliament meeting next week where Beijing is set to unveil economic targets for the new year. [.SS]

"Although the (activity) survey readings remain below historical averages, this is likely distorted by sentiment effects," said analysts at Capital Economics.

"We expect a modest recovery in China's growth momentum thanks to policy support, although this rebound appears fragile and may not last once policy support is scaled back."

China's mainland markets were higher. The bluechips rose 0.4% and index edged up 0.2%, after rebounding nearly 10% last month on the back of Beijing's efforts to stop short-selling in the market.

Hong Kong's also reversed earlier losses to be up 0.6%.

Overnight on Wall Street, the and Nasdaq closed at record highs. The U.S. personal consumer expenditures (PCE) price index, the Federal Reserve's preferred gauge for inflation, rose 0.3% in January from a month earlier. The core PCE price index rose 0.4%, as expected.

That kept the prospects of a June interest rate cut alive. Markets still see a 76% probability the Fed will start cutting interest rates in June, with a total easing of 82 basis points priced in for this year.

"The PCE data confirms the unhelpful January inflation surprise already previewed by earlier CPI and PPI numbers," said Taylor Nugent, a senior economist at National Australia Bank (OTC:).

"We don't think the disinflation trend has been arrested, but there is some risk support from residual seasonality issues in the January increase also bleeds into February."

Further aiding sentiment, Fed speakers overnight reiterated that policymakers will look through recent data that showed price pressures rebounded in January to focus on overall progress in inflation.

In Europe, inflation readings in Germany, France and Spain all eased, mostly in line with expectations, which should bode well for eurozone inflation data due later on Friday.

That drove a fall in the euro, which was hovering at $1.0810, having eased 0.3% overnight.

The yen slipped 0.3% to 150.43 per dollar. It gained 0.5% overnight after a Bank of Japan board member, Hajime Takata, said sustained achievement of 2% inflation was already in sight.

However, BOJ Governor Kazuo Ueda later struck a more cautious tone, saying that it was too early to conclude that sustained achievement of the central bank's 2% inflation target can be foreseen.

Bonds were steady after rallying in relief that the U.S. PCE data was not worse than expected. The held at 4.2542% after edging 4 basis points lower overnight. It jumped 29 basis points last week as markets pushed back bets on early rate cuts.

Oil prices edged up on Friday. rose 0.4% to $82.21 a barrel, while gained 0.3% to $78.47 per barrel.

The price was 0.1% higher at $2,044.99.