By Kane Wu

HONG KONG (Reuters) -Asian stocks rose on Thursday to clock their strongest performance in 10 months, as investor sentiment warmed on a relatively benign global interest rates outlook and signs of economic recovery.

Europe and Wall Street are also set to open higher with FTSE futures and E-mini futures for the S&P 500 index up about 0.1% each.

The MSCI Asia-ex-Japan stocks index was up 0.1% at 0507 GMT, gaining 6.9% so far this month, setting it on course to mark the best month since January.

South Korea's KOSPI has led the rally in Asia with 10.6% gains this month, followed closely by Taiwan and Japan's Nikkei.

"Seems market participants are clearly taking the no landing and Fed done scenario to heart. Modest China domestic stimulus is having a positive effect," said John Milroy, an investment adviser at Ord Minnett in Sydney.

"Inflation prints and bond markets suggesting the central banks are at least due a pause in the raising cycle. Markets like that."

Hong Kong's Hang Seng Index pared losses to be up 0.1%, while China's benchmark CSI300 Index rose as much as 0.24%, despite disappointing Chinese manufacturing data released on Thursday.

The closely watched factory survey showed manufacturing activity contracted for a second straight month in November and at a quicker pace, suggesting more government support is needed to help shore up growth in the world's second-largest economy.

For the month, the Hang Seng has lost half a percentage point while CSI300 was down over 2%.

Stock markets around the world struggled on Wednesday, after a strong month driven by market expectations of peak Federal Reserve rates, and as a fall in the dollar and in U.S. bond yields loosened financial conditions.

Ten-year U.S. yields are down more than 60 basis points in November, on track for the steepest monthly drop since late 2008.

While U.S. central bank officials on Wednesday sent mixed messages, investors still focused on comments made on Tuesday by Fed Governor Christopher Waller, an influential and previously hawkish voice at the bank. Waller had said rate cuts could begin in months if inflation keeps easing.

Meanwhile, data from the U.S. showed a strong economy in the third quarter and also a downtrend in inflation, reinforcing expectations the Fed might cut interest rates earlier than expected.

"We think liquidity and momentum can still support markets through December," said Redmond Wong, market strategist, Greater China at Saxo Markets, and that rate cuts could be as early as the first quarter as U.S. economy has shown signs of deceleration.

The U.S. personal consumption expenditure inflation report will be released on Thursday.

Fed Chair Powell is also due to speak on Friday and expected to offer crucial insights into the Fed's policy approach ahead of their December meeting.

U.S. financial conditions are the loosest since early September and have eased 100 basis points in a month, according to Goldman Sachs. The bank's global and emerging market indexes ticked up a bit last week, but financial conditions are also looser by around 100 bps from a month ago. U.S. rates futures markets are now pricing in more than 100 basis points of rate cuts next year starting in May, and the two-year Treasury yield is its lowest since July - it has slumped nearly 40 basis points this week alone.

"Absent rapid Fed easing, we expect a more challenging macro backdrop for stocks next year with softening consumer trends at a time when investor positioning and sentiment have mostly reversed," analysts at J.P.Morgan said in a note on their 2024 global outlook.

"Equities are now richly valued with volatility near the historical low, while geopolitical and political risks remain elevated. We expect lackluster global earnings growth with downside for equities from current levels."

Oil prices traded steadily after rising more than $1 on Wednesday ahead of expected production cuts by the OPEC+ group.

U.S. crude pared losses to gain 0.23% to $78.04 per barrel and Brent was down 0.18% at $82.95.

Spot gold slid 0.04% to $2,043.69 an ounce.