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 Europe's biggest markets gained more than half a percent and
Portugal rallied by 1 percent, after worries about a Portuguese bank
last week caused the first sign this year of a return of nerves over
Europe's southern half.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.4
percent, with Seoul gaining 0.3 percent. Japan's Nikkei bounced 0.9
percent after several sessions of losses.
European markets had calmed on Friday as investors decided that
losses associated with the founding family of Banco Espirito Santo
were unlikely to disrupt Portugal's financial system or revive
broader worries about the bloc's weaker economies.
Suspicion remains that stocks and a number of other markets buoyed
by the money the Fed has poured into the global economy are headed
for a fall. But it may take a clearer sign that U.S. interest rates
are about to rise, tightening that ultra-loose monetary policy, to
burst any bubble.
"This continual sense of calm before the storm endures," said Simon
Smith, the chief economist at retail foreign exchange trading
platform Fxpro.
While stock market investors had become more nervous and calls for a
pullback in indices rose, he said, the drop on Monday in gold, the
traditional safe haven, suggested the market was growing more
optimistic. Gold reached a 16-week high last week.
Portuguese bond yields fell by almost 10 basis points after BES, the
country's biggest listed bank, took steps to reassure investors of
its stability. Spanish, Italian and Greek bond yields also fell.
"The markets will recover a bit," said Emile Cardon, an economist at
Rabobank.
"But I'm a bit cautious. There's still reason to believe that not
all problems were resolved in the euro zone and we will continue to
see bouts of volatility during a fragile recovery."
European Central Bank President Mario Draghi will speak in the
European Parliament later on Monday.
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BANKS' RESULTS
It is not just around Europe that there are concerns.
Singapore's main index went flat after the city-state reported a
surprise 0.8 percent annualised contraction in economic activity for
the second quarter, led by a steep drop in manufacturing.
Attention will be on shares in Citigroup, which sources said it
would announce on Monday a deal to pay $7 billion to resolve a U.S.
government investigation into shoddy mortgage-backed securities.
The first quarterly earnings have not been especially auspicious and
many of the major U.S. banks report earnings this week, along with
big tech names, including Intel Corp, Yahoo Inc, eBay Inc and Google
Inc.
Federal Reserve Chair Janet Yellen's appearance in the U.S. Congress
on Tuesday and Wednesday will dominate global markets, which want
above all to know how long U.S. rates might stay near zero once the
central bank ends its asset-buying programme.
The futures market rallied last week as investors again pushed out
the likely timing of a rate hike into the second half of 2015.
Data from the U.S. this week include retail sales, industrial
production and several housing indicators. China reports gross
domestic product for the second quarter on Wednesday and retail
sales for June.
Currency markets were quiet with the dollar index a touch lower at
80.102.
Oil markets seem less concerned that the violence in the Middle East
will affect supply in any major way, pulling prices lower over the
last few weeks.
On Monday, Brent crude oil was off 2 cents at $106.45 a barrel, not
far from a three month-trough of $106.27. U.S. crude shed 51 cents
to $100.32 per barrel.
(Additional reporting by Sudip Kar-Gupta and Marius Zaharia)
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