Japan said it plans to spend at least $100 billion more to help steer its economy through the global crisis, as investors seized on hopes that markets may have bottomed to buy stocks and commodities on Monday.
Grappling with its worst recession since World War Two, Japan will unveil a new economic package on Friday, doubling stimulus spending to around 4 percent of gross domestic product, Finance Minister Kaoru Yosano said.
A rally in European shares driven by Asian gains ran out of steam on Monday as U.S. futures indicated a lower opening on Wall Street. The pan-European FTSEurofirst 300 index of top shares was down 0.4 percent by early afternoon.
Asian shares had climbed to a six-month high as demand rose for riskier assets while investors sold the low-yielding yen and Japanese government bonds and safe-haven gold.
"With the G20 summit last week, and obviously some massive stimulus packages, there's some good news here and there, mixed with some bad news," said James Foulsham, head of trading at CMC Markets in Sydney.
The depth of the challenge still facing western Europe's contracting economies was underlined by data showing consumer demand remained weak even as inflationary pressures waned.
The EU statistics office said euro zone retail sales dropped much more sharply than expected in February while producer prices also fell.
Economic and Monetary Affairs Commissioner Joaquin Almunia said the EU needed to consolidate its representation in the International Monetary Fund to be able to pull its weight in shaping global economic policy.
"Too often the EU's voice on key issues at the global level is fractured and we fail to influence policy debates as effectively as we might," he said.
British new car sales fell by just over 30 percent in March, prompting renewed calls for government help for buyers, as European units of General Motors battled to restructure themselves.
The Financial Times published details of a confidential report recommending struggling EU countries in central and eastern Europe should switch to the euro even without full euro zone membership.
The paper said the report supported a region-wide anti-crisis strategy by the IMF, World Bank and European Bank for Reconstruction and Development.
RISK APPETITE RISES
The yen hit its lowest level against the dollar in almost six months, and Asian bond spreads narrowed for a fourth consecutive session, leading risk premiums on investment-grade debt to their lowest in nearly three months.
Analysts pointed to signs of a re-emergence of the pre-crisis strategy of carry trades, involving speculators selling the low-yielding Japanese currency in favour of higher-yielding and riskier assets.
In another move away from safe-haven assets, gold prices fell more than 2 percent, slipping towards a two-and-a-half-month low.
Heartened investors also piled into the $19 billion rights issue of HSBC, Europe's largest bank. HSBC sold 4.89 billion shares, or 96.6 percent of the offering, to existing shareholders and bankers successfully placed the remaining shares on Monday morning.
Oil prices rose above $53 per barrel, buoyed by expectations that rich nations' efforts to stimulate their economies may help end the global downturn sooner than expected.
Friday's dire U.S. jobs data, which showed unemployment soared to 8.5 percent, had failed to dent last week's rally as markets found comfort in the fact that the numbers came in around forecasts.
