Asian markets swung Thursday morning after a surprise pick-up in Chinese factory activity that indicated stability in the world's number two economy but fuelled fears authorities will hold off fresh stimulus.

Trading was cagey across the region following oil-linked losses in New York and ahead of Friday's closely watched US jobs report that could precipitate another Federal Reserve interest rate hike.

Beijing said its purchasing managers index of manufacturing activity hit 50.4 last month, its highest level since October 2014 and suggesting the economy is stabilising following a series of policy tweaks aimed at kick-starting growth.

The reading was sharply up from July's 49.9 and confounded expectations for a drop to 49.8 in a survey for Bloomberg News. Anything above 50 marks growth and a figure below points to contraction.

Analysts said recent weak PMI data had been skewed by severe floods in China that had hit key manufacturing areas.

"Underlying demand continues to stabilise, suggesting that the expansionary fiscal policy stance adopted since early this year is still supporting growth," Julia Wang, an economist with HSBC in Hong Kong, told Bloomberg News.

China's economy is growing at its slowest rate for a quarter of a century.

But Zhu Qibing, chief macro economy analyst at BOCI International (China) in Beijing said the "People's Bank of China will refrain from more easing, but won’t tighten immediately".

- Oil up after sell-off -

Hong Kong ended up 0.8 percent but Shanghai closed 0.7 percent down with both markets witnessing volatility.

Tokyo rose 0.2 percent by the close, with a weaker yen keeping the Nikkei just above water. But Sydney fell 0.3 percent and Seoul was off 0.1 percent while Taipei, Jakarta and Manila also sank.

In early European trade London rose 0.5 percent, Frankfurt added 0.3 percent and Paris climbed 0.2 percent.

The yen has softened against the dollar this week after Fed boss Janet Yellen -- and later her vice chair Stanley Fischer -- indicated rates could rise this year as the US economy improves.

The dollar bought 103.44 yen in Asia Thursday, up from 103.43 yen in New York and sharply higher than the levels below 100 yen seen last week before Yellen's speech.

Focus is now on Friday's non-farm payrolls figures, which will be pored over for clues about the Fed's next move. A private report by payrolls firm ADP said US businesses added a solid 177,000 new staff in July.

Analysts said that data supports the consensus forecast for a solid gain on Friday.

"As long as tomorrow’s jobs report isn’t dreadful, I would expect the hawkish rhetoric to pick up further in the coming weeks and markets to price in a hike more, which would likely mean a stronger dollar," Craig Erlam, senior market analyst at OANDA, said in a note.

On oil markets, both main contracts edged up slightly a day after plunging in response to an unexpected jump in US crude inventories.

West Texas Intermediate edged up 0.5 percent to $44.93, having dived 3.6 percent Wednesday, while Brent also added 0.4 percent to $47.08 after a 2.7 percent fall.

- Key figures around 0800 GMT -

Tokyo - Nikkei 225: UP 0.2 percent at 16,926.84 (close)

Shanghai - Composite: DOWN 0.7 percent at 3,063.31 (close)

Hong Kong - Hang Seng: UP 0.8 percent at 23,162.34 (close)

London - FTSE 100: UP 0.5 percent at 6,814.67

Euro/dollar: DOWN at $1.1131 from 1.1156 late Wednesday

Dollar/yen: DOWN at 103.44 yen from 103.43 yen

Pound/dollar: UP at $1.3139 from $1.3128

New York - DOW: DOWN 0.3 percent at 18,400.88 (close)

Source: AFP