By Sam Byford

TOKYO, July 8 (Reuters) - Asian shares advanced on Friday as fears of an economic slowdown cooled somewhat, though news of the shooting of former Japanese Prime Minister Shinzo Abe jolted Japanese shares and drove up the safe-haven yen.

Abe was shot while campaigning in the city of Nara, a government spokesman said, causing the dollar to fall as much as 0.4% on the yen, and the Nikkei share index to pare its gains.

The share benchmark was last up 0.5% having hit a 10-day high earlier in the session.

"While the details are still scanty, risk aversion is bound to pick up and global equities may see some selloffs," said Charu Chanana, market strategist at Saxo Capital Markets.

"We saw risk aversion building in with yen gaining on the knee-jerk reaction, and this move may intensify as London gets in," she added.

MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS > was last trading up 0.3% also having pared earlier gains, with South Korea's KOSPI index leading the charge up 0.8% and set for its best week in five months.

EUROSTOXX 50 futures traded flat and S&P500 e-mini futures lost 0.4% however.

The Asian share rally followed a positive close for the three major U.S. indices overnight on encouraging comments from Federal Reserve officials. Governor Christopher Waller called recession fears "overblown," while St. Louis Fed Bank President James Bullard said he saw a "good chance" of a soft landing for the economy.

Waller suggested the Fed would likely attempt to tackle inflation with a 75-basis-point interest rate hike in July and a 50-basis-point hike in September. However, he said, "if inflation just doesn't seem to be coming down, we have to do more," allowing for possible future 25-basis-point hikes.

The latest indicator of the health of the U.S. economy is due later in the day with the release of U.S. non-farm payrolls data. The consensus expectation is for 268,000 jobs to have been added in May.

"How the market will react to deviations from this expectation is debatable," said ING's Robert Carnell and Iris Pang in a client note. "You could argue that a stronger figure will mean the Fed has more work to do, and so raises the prospects of a harder landing. But sometimes the market reaction is more simplistic than you might imagine."

Sterling held steady at $1.201 after putting on 0.8% overnight when British prime Minister Boris Johnson said he would resign, essentially back where it was at the beginning of the week after experiencing a rocky few days amid British political turmoil.