* India, Australia lead Asian shares higher
* Dollar holds firm on upbeat U.S. economic news
* Oil, gold prices capped by robust dollar
* European stocks set to extend rally into third day (Updates to afternoon, adds European markets)
By Yoo Choonsik
SEOUL, Dec 23 (Reuters) - Indian and Australian shares led Asian stock markets higher on Wednesday, while oil and gold came under pressure as the dollar held firm thanks to optimism about the U.S. economy.
Leading European stock market indexes were expected to open
slightly higher, extending a sharp two-day winning run,
according to financial spreadbetters, while U.S. equity stock
futures
"The market atmosphere is not bad at all, but volume is pretty thin as the end of the year approaches," said Lee Sun-yeb, a market analyst at Shinhan Investment Corporation in Seoul, referring to the South Korean market's <.KS11> rise on hopes for a U.S. economic recovery.
The MSCI index of Asia Pacific stocks traded outside Japan <.MIAPJ0000PUS> rose 0.8 percent.
India's 30-share BSE Index <.BSESN> jumped more than 2.5 percent to a one-week high and Australia's benchmark S&P/ASX 200 stock index <.AXJO> rose 0.8 percent to a three-week closing high, both led by banks.
Tokyo's stock market was closed for the Emperor's birthday holiday, dampening activity in Asia..
Shares in China Pacific Insurance <2601.HK>, the country's third-largest life insurer, dipped in the early hours of their trading debut and traded 0.9 percent higher by 0757 GMT, drawing some investor attention in an otherwise lacklustre market.
The share sale raised $3.1 billion and was the world's seventh-largest this year.
DOLLAR CAPS OIL, GOLD
U.S. crude oil for February delivery
The dollar was holding at 91.70 yen
Gold prices edged higher on bargain hunting after the price dropped to its weakest in seven weeks the previous day, but the firmer dollar capped the upside potential.
"This correlation with the U.S. dollar seems to be one of the most important factors right now," said Wong Eng Soon, an investment analyst at Phillip Futures in Singapore.
Spot gold