Nikkei Leads Asia Higher After EU Stimulus Hopes

Asian stocks rose on Friday, tracking strong gains in European markets after the European Central Bank (ECB) and the Bank of England (BoE) suggested they would keep interest rates low for some time, but caution ahead of key U.S. jobs data capped large gains.

Japan's benchmark Nikkei index hit a five-week high, Australia's S&P ASX 200 rose to a two-week high and the Shanghai Composite extended gains to stay above the 2,000 level. South Korea's Kospi was the sole laggard, down 0.3 percent.

For the week, the Nikkei is Asia's best-performing index with gains of 4.6 percent while the Kospi came in last place with a 1.6 percent loss.

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What's Influencing Markets

As U.S. markets were closed Thursday for the July 4 holiday, Asian traders took their cues from Europe where the BoE and ECB kept benchmark rates unchanged, but indicated that monetary policy would remain accommodative. This sparked the biggest one-day jump in European shares in ten weeks.

"It was central bank independence day, fourth of July. The ECB and BoE made a very strong statement and the statement is this: A rise in yields in Europe is unwelcome, we've got to start giving forward financial guidance to financial markets that this is what we're going to expect," said Robert Rennie, global head of currency strategy at Westpac Bank.

(Read More: July 4: Independence Day for Europe's Central Banks?)

Investors awaited June U.S. non-farm payrolls figure, due for release when U.S. markets re-open on Friday. Economists surveyed by Reuters expect a gain of 165,000 jobs, lower than May's 175,000 figure. The data could shape market expectations for when the Federal Reserve will begin tapering off its $85 billion monthly bond-buying stimulus program.

"We haven't really seen a huge amount of cautious positioning expressed in Asia around non-farm payrolls," said Chris Weston, market strategist at IG in a note.

Nikkei Rallies 2%

A weaker currency supported Japanese exporters after the dollar rose back above the 100-yen level, helping the index cross the 14,165 mark to its highest levels since May 29. Optical fiber maker Furukawa and steel producer Kobe Steel added 7.5 and 6.7 percent, respectively.

"Textbook theory would suggest that USD/JPY is the best guide on the market's interpretation of the U.S jobs number. However, in recent times USD/JPY seems to have adopted the mantra as the cleanest 'risk on, risk off' trade out there, so there's a possibility we could see it actually fall on a number above consensus," Weston added.

A record first-quarter net profit from convenience store chain Seven & I Holdings sparked a rally across retailers. Shares rose 1.3 percent while Fast Retailing climbed 3 percent. Traders say that the results indicate that luxury firms are not the only beneficiaries of the wealth effect created by equity market gains. Sentiment is also improving generally as a result of Prime Minister Shinzo Abe's stimulus policies.

(Watch Now: 'Abenomics' Needs a Fourth Arrow: Pro)

Australia Up 1%

Resource stocks ignored weaker metals prices to lead the gains on Sydney's benchmark index. Fortescue Metals rose 2 percent - this was despite copper falling from the previous session's two-week high and gold extending losses.

Casino operator Crown increased 3 percent after winning conditional approval for a VIP gaming room at its luxury hotel. Rival Echo Entertainment declined 5 percent on the news.

Shanghai Above 2,000

China's benchmark index traded within range of the previous day's one-week high of 2,022 points. The index has been on a steady uptrend since hitting a near four-year low of 1,849 points last month.

Real-estate developers extended the previous day's sharp gains. Poly Real Estate and China Merchants Property jumped nearly 5 percent each.

Banks enjoyed a modest relief rally as signs that the mainland's cash crunch eased with the benchmark seven-day repurchase rate back to pre-crunch levels of between 3 and 4 percent. ICBC added 1 percent while China Construction Bank rallied over 3 percent.

(Read More: Funds Out of Asia? We See Capital Coming In: ADB)

In Hong Kong, shares of casino operator Macau Legend Development rose as much as 4 percent in its market debut. Shares opened at HK$2.45, ten cents higher than its HK$2.35 price.

Kospi Underperforms

A near 4-percent loss in market heavyweight Samsung Electronics dampened sentiment on South Korea's benchmark index. The tech giant estimated profit to increase 47 percent in the second-quarter, but the figure was still below market forecasts.

"The stock price was overbought and expectations were higher than were realistic, so I view this as a market correction," said James Rooney, chairman of Advanced Capital Partners.

(Read More: What Happened to Unstoppable Samsung?)

The lower-than-expected results weighed on other tech plays with LG Electronics down 1 percent and LG Display lower by 2 percent.

By's Nyshka Chandran. Follow her on Twitter @NyshkaCNBC