*

Japan's Nikkei, Taiwanese shares hit record highs

*

Investors hope for good U.S. CPI figures after benign PPI

*

Fed rate cut next week fully priced in, small chance of 50

bps

*

Oil holds gains, gold hovers near all-time highs

By Stella Qiu

SYDNEY, Sept 11 (Reuters) - Japanese and Taiwanese

shares set records on Thursday as technology companies rallied

while investors wagered that U.S. inflation data will be well

behaved enough to ensure an interest rate cut next week, and

perhaps two more by year end.

Before then, the European Central Bank is widely expected to

hold rates steady later in the day but a fraught trade and

political outlook means it will likely keep alive the prospect

of further easing.

Meanwhile, oil prices held gains after Poland downed

suspected Russian drones in its airspace and as the U.S. pushed

the EU to impose new sanctions on buyers of Russian oil. Gold

climbed near all-time highs.

Japan's Nikkei gained 0.8% to hit a record as tech

and energy firms as well as utilities jumped. Taiwanese shares

rose 1% to also set a record as leading chipmaker TSMC

gained 2.5%.

SoftBank rose almost 9% after Stargate Project

partner Oracle soared 36% on Wall Street overnight in

the biggest one-day percentage gain since 1992 as it forecast a

demand surge from AI firms for its cloud computing services.

Nasdaq futures rose 0.2% and S&P 500 futures

inched up 0.1%.

MSCI's broadest index of Asia-Pacific shares outside Japan

was off 0.1% due in part to drag from Hong Kong

where the Hang Seng index was down 0.9%.

Overnight, a benign reading on U.S. producer prices led

markets to price in more chance of three interest rate cuts from

the Federal Reserve this year. Investors have fully priced in a

quarter-point move from the Fed at next week's meeting, with an

8% chance of a 50 basis-point cut.

With PPI out of the way, investors are now focused on the

consumer prices index for August due out later in the day. A

Reuters poll showed the headline CPI likely rose 2.9% from a

year earlier, the biggest increase since January, while the core

measure likely held at 3.1%.

"Unless CPI delivers a significant upside shock, investors

are likely to maintain their dovish outlook," said Julien

Lafargue, chief market strategist at Barclays Private Bank.

"This shift in inflation dynamics could prove pivotal for

the U.S. Fed, which now faces fewer constraints in pursuing a

more aggressive rate-cutting cycle. With inflation appearing

less of a threat, the Fed may find room to stimulate the economy

more assertively."

In foreign exchange, movement was muted with the U.S. dollar

struggling for direction. The dollar index was last flat at

97.81, a touch above a seven-week trough of 97.25.

The Australian dollar hit a 10-month top of $0.6636

overnight before steadying at $0.6616 on Thursday.

In the bond market, 10-year Treasury yields

edged up 2 basis points to 4.0531%, having fallen 4 bps

overnight as a solid 10-year note auction alleviated some

concern about investor appetite for long-term U.S. debt.

An even more telling gauge will be the Treasury's $22

billion sale of 30-year bonds on Thursday. The 30-year yield

rose 2 bps to 4.7028%, having come down more than 30

basis points since it briefly topped 5% a week ago.

In commodity markets, oil prices held gains, having settled

up over 1%. U.S. crude was flat at $63.65 a barrel, while

Brent was little changed at $67.49.

Spot gold prices gained 0.1% to $3,644 an ounce.