Asian shares rose for a third consecutive day on Friday even as China stocks tumbled into correction territory, while the Federal Reserve's cautious stance towards lifting interest rates kept the dollar on the back foot.

Caution over Greece also tempered gains, as euro zone leaders prepared for an emergency summit on Monday to try to avert a Greek debt default.

Financial spreadbetters expected Britain's FTSE 100 .FTSE to open up 0.1 percent. Germany's DAX .GDAXI was seen up 27-38 points, or 0.2-0.3 percent, while France's CAC 40 .FCHI was seen up 2-4 points, or 0.1 percent.

A broad index of Asia-Pacific shares outside Japan .MIAPJ0000PUS gained 0.6 percent while Japan's Nikkei .N225 rose 0.9 percent from a one-month low set on Thursday.

But China shares fell heavily, tumbling more than 4 percent at one point. By midday, the key CSI300 index .CSI300 and benchmark SSEC .SSEC were down more than 9 percent for the week and over 10 percent from their early June peak.

This week's correction was triggered by regulators' fresh moves to tighten margin financing - a key engine behind the market's frenzied rally - and was worsened by a tidal wave of initial public offerings that greatly increase share supply.

"First... room for further monetary easing could be less than anticipated, and inflows of new investors could have already peaked," Bosera Asset Management Co said in a note to clients on the correction.

"Secondly, a highly-leveraged bull (market) is not sustainable," Bosera said, citing moves by the government to reduce margin loans, which the asset manager estimates have reached between 3 trillion and 4 trillion yuan.

Shares elsewhere in Asia were buoyed by views that the Federal Reserve may be more cautious about raising rates this year than earlier expected.

A moderate recovery in the U.S. economy in previous months had raised concerns the Federal Reserve would strike a hawkish stance at its meeting on Wednesday, but its cautious tone sparked a sense of relief and prompted investors to snap up risky assets.

"This removes a source of uncertainty for Asian markets in the near term and should be a positive factor going ahead, though the Greek and Chinese factors will temper any optimism," said Stephen Chiu, a strategist at Mitsubishi UFJ Financial Group in Hong Kong.

While analysts broadly concluded the Fed is on track for its first rate increase in more than a decade in September, fixed income derivatives markets such as Fed fund futures <0#FF:> expected the first hike only in December.

"The markets seem to be concluding that the Fed will raise rates only once this year, and not twice as had been priced in (before the Fed's policy meeting ended on Wednesday)," said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.

Growing expectations of a slower trajectory of U.S. interest rate increases sent the dollar swooning against a basket of currencies with the broad dollar index =USD languishing near one-month lows.

That broad undertone of caution from global investors reflected in the latest flows data. While emerging Asian bond and equity markets saw a sharp moderation in outflows from last week, overall capital flows were still in the red, according to EPFR data and ANZ strategists.

In bonds, ten-year U.S. Treasury yields US10YT=RR settled at 2.33 percent while comparable Japanese yields JP10YT=RR held at 0.44 percent.

In commodities, oil prices were a shade weaker, but plentiful output was broadly met by demand.

U.S. crude futures CLc1 edged lower to $60.41 a barrel, while Brent LCOc1 slipped 8 cents to $64.18.

Gold was sidelined at $1,199.15 an ounce XAU=.