Asian shares rebounded on Friday, led by strong gains for battered Chinese stocks after China suspended its market circuit breaker and set a firmer midpoint rate for trading of the yuan for the first time in nine days.

Shares in Asia were still on track for their biggest weekly fall in more than four months, but Friday's advances seemed to reduce some of the fears that have hit global markets.

China had announced late on Thursday it suspended its new stock market circuit breaker introduced only on Monday as the system failed to reduce market volatility, with some market players even saying it backfired.

The CSI300 index of major Shanghai and Shenzhen stocks was up 2.7 per cent and the Shanghai Composite climbed 2.4 per cent.

The gains shrank losses for the week for both to less than 10 per cent.

Higher Chinese stocks also supported MSCI's broadest index of Asia-Pacific shares outside Japan, which erased earlier losses to be up 0.6 per cent. That put it on track for a loss this week of about 6 percent, which would be its biggest fall since August.

The People's Bank of China (PBOC) helped soothe markets by setting a stronger yuan midpoint rate against the dollar.

It set the rate at 6.5636 per dollar prior to market open, firmer than both the previous fix and Thursday's closing quote. The spot market opened at 6.5700 per dollar, and was trading at 6.5887 at 0313 GMT.

The Chinese central bank had on Thursday wrong-footed traders by reportedly intervening heavily to defend the yuan in offshore trade, reversing a decline of more than 1 per cent that took it to a record low of 6.7600 per dollar.

The PBOC's Friday setting is "a signal it does not intend to keep allowing the yuan to fall," said Yoshinori Shigemi, global market strategist at JPMorgan Asset Management.

Japan's Nikkei erased earlier declines to rise 0.5 per cent. The gain helped it recover from the three-month low on Thursday, although it remains on track for a roughly 6 per cent drop for the week, the biggest since September.

Wall Street also had a gloomy session, with the S&P 500 losing 2.4 per cent on Thursday, with 40 per cent of the stocks in the benchmark trading 20 per cent or more off of their highs, the definition of a bear market.

That was despite a drop in layoffs and the number of Americans filing for jobless benefits, pointing to a strong December employment report on Friday.

However, weak data on US manufacturing, construction spending, auto sales and export growth prompted economists to slash their fourth-quarter GDP growth estimates by as much as one percentage point to as low as a 0.5 per cent annual pace. The economy grew at a 2 per cent annual rate in the third quarter.

After the US market close, two Apple suppliers added to growing worries about slowing shipments of iPhone 6S and 6S Plus by cutting their revenue estimates for the third quarter.

The Chinese moves offered a leg up to oil futures, with both Brent crude and US oil rallying more than 2 per cent at one point.

Brent gained 1.9 percent to $34.40 after touching $32.16 on Thursday, the lowest since April 2004. The gains narrowed losses for the week to 7.7 per cent.

West Texas Crude advanced 1.9 per cent to $33.91, on track for a weekly loss of 8.4 per cent.

The shaky risk appetite seen this week sent investors flocking to low-risk assets such as bonds, gold and traditional safe-haven currencies, although that demand eased slightly on Friday.

The 10-year US Treasuries yield fell to a 2 1/2-month low of 2.119 per cent on Thursday and last stood at 2.1773 per cent.

Gold eased back to $1,103.4 after earlier rising to $1,112 , the highest since November 4. That brought gains for this year to 4.8 per cent.

The yen pulled back from Thursday's 4 1/2-month high of 117.33 yen, last trading at 118.20 yen. The euro slipped 0.4 per cent to $1.0886.

The Australian dollar, often used as a liquid proxy for China trade, strengthened to $0.7054 after falling to a three-month low of $0.6981 on Thursday. It's down 3.1 per cent so far this year.