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 With trading thinned by holidays in London and a number of Asian
countries, a solid showing for manufacturing sentiment in Germany
drove the Frankfurt stock exchange up about 1 percent.
That helped the euro and France's CAC 40, which both gained almost
half a percent. Futures markets pointed to a 0.3 percent gain for
Wall Street.
Elsewhere the picture showed more of the concern over the banking
sector, weak economic growth and over-inflated asset prices that has
gripped markets for much of this year.
Brent crude recovered some ground in European trade but was still
down 0.3 percent at $47.22 a barrel. The European banking index
and MSCI's broadest index of Asia-Pacific shares outside Japan both
lost 0.3 percent.
The yen, which tends to gain when investors worry about growth,
reached 106.14 yen per dollar in early Asian trade before handing
back some of last week's almost 5-percent gain.
That was the yen's biggest weekly rise since the 2008 financial
crisis, thanks largely to a Bank of Japan (BOJ) policy meeting that
gave no hint of further efforts to stimulate a long-moribund economy
with more outright money-printing.
"A lot of people are still talking about Japan," Commerzbank
strategist, Thu Lan Nguyen, said.
"The BOJ are creating the impression that they will always react too
late to deflationary risks. Now that they have disappointed, I think
it would take something really new to change the market's mind on
the yen."
Adding to the subdued sentiment, a survey released on Sunday showed
that activity in China's manufacturing sector expanded for the
second month in a row in April but only marginally, raising doubts
about the sustainability of a recent pick-up.
Australian shares fell 0.2 percent after disappointing results from
Westpac Banking Corp.
Australia's central bank board will meet for a policy review on
Tuesday and is widely expected to keep its cash rate at a record low
of 2 percent, though some economists expect a cut.
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Markets in Hong Kong, China, Taiwan, Singapore and Malaysia were
closed on Monday. Japan is in the middle of its Golden Week holidays
and markets there will be closed on Tuesday, Wednesday and Thursday
of this week.
Investors have also turned broadly negative on the dollar in the
past two months, worried that the U.S. Federal Reserve will be
unable to raise interest rates this year.
A fall to a 6-1/2 month low of $1.1493 against the euro bodes
ill for the run-up to payrolls data on Friday. The dollar index of
its strength against a basket of six rival currencies, fell 0.2
percent to 92.868
"The start of the new month does not mean a new trend. The technical
tone of the dollar is weak," Brown Brothers Harriman's global head
of currency strategy in New York, Marc Chandler, said in a note to
clients.
"The Federal Reserve acknowledges the continued improvement in the
labor market. The problem is that it has not translated to stronger
consumption, and business investment remains soft."
(Additional reporting by Danilo Masoni in MILAN and Lisa Twaronite
in TOKYO; Editing by Louise Ireland)
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