By Kevin Plumberg

HONG KONG, Nov 6 (Reuters) - Asian stocks rose ahead of the latest U.S. payrolls report on Friday, expected to show the fewest job losses since August 2008, while oil prices recovered to $80 a barrel after a sharp drop on high U.S. fuel inventories.

Stock indexes in Britain and France were expected to open slightly higher, while Germany's DAX was expected to open lower, according to financial bookmakers. U.S. equity futures were down slightly after a solid 2 percent rise in cash markets on Thursday.

The Australian dollar edged further above $0.91 after the Reserve Bank of Australia sharply upgraded growth forecasts and said more gradual increases in interest rates will be required.

That contrasted with the Federal Reserve this week, which said rates will stay near zero for a long time, and the Bank of England on Thursday, which extended its emergency supply of funds.

Financial markets this week have been on a rollercoaster of volatility, though tensions have eased ahead of the U.S. October employment report. After jumping well above 30 on Monday, the VIX index, a measure of risk based on S&P 500 index options, has tumbled for four days.

'I think the market is likely to rise both if the (U.S. employment) numbers come in as forecast as well as if there's a positive surprise,' said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities in Tokyo.

'Even though the unemployment rate is likely to hit 10 percent, this will not badly affect things since it's unavoidable. Employment can't recover that fast.'

Japan's Nikkei share average closed up 0.7 percent, led by technology and retail stocks. NEC Corp jumped 10.1 percent, as dealers closed some bets against the stock after Japan's largest PC maker announced a widely expected share sale.

The MSCI index of Asia Pacific stocks outside Japan advanced 1.8 percent, with gains spread evenly across the materials, energy, industrials, IT and financials. The Thomson Reuters index of regional stocks outside Japan rose 2.2 percent.

The earnings outlook is dominated by the consumer discretionary and IT sectors. Consumer discretionary stocks are expected to record earnings growth of 58.9 percent over the next 12 months, mostly driven by automakers, Thomson Reuters Proprietary Research shows.

IT is expected to achieve equally bullish earnings growth of 50.9 percent in the next 12 months.

PAYROLLS VIGIL

After a bigger-than-expected drop in first-time claims for jobless insurance last week, investors felt some optimism about the October payrolls figure. Of course the jobless claims figures were outside of the period covered in the official employment survey.

The U.S. economy likely shed 175,000 jobs in October, according to a Reuters poll, the 22nd month of job losses, and unemployment is forecast to tick up to 9.9 percent. However, the pace of labour market contraction has been slowing.

In currency markets, the Australian dollar rose 0.2 percent to $0.9120, making steady progress back up to its October high above $0.93. Its near-term direction may depend on the chances of a December interest rate hike.

The swap market reflects a slightly better than 50/50 chance of a quarter percentage point increase.

The U.S. dollar was steady against major currencies ahead of the payrolls number, but losing ground against emerging Asian currencies.

'No doubt a strong jobs number could give the high-yielders a lift,' said Amber Rabinov, market economist at ANZ. 'Having said that we don't think there is much room for them to rally as participants are very long on pro-cyclical currencies like the Aussie and the Kiwi.'

U.S. crude for December delivery rose 0.4 percent to $79.96 a barrel. Oil has spent the last month dancing around $80 a barrel, in a range of $82 to $76.

(Additional reporting by Elaine Lies in TOKYO and Anirban Nag in SYDNEY; Editing by Kazunori Takada)

((Reuters Messaging: kevin.plumberg.reuters.com@reuters.net Email: kevin.plumberg@thomsonreuters.com; 852-2843-6370))

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