Asian shares kicked of the second quarter with modest gains on Monday, as surprisingly firm China manufacturing data dispelled fears of a hard landing in the world's second biggest economy, but caution capped prices before U.S. and European factory data.
European equity markets were also seen gaining, with financial spreadbetters predicting major European markets to open up 0.3 to 0.5%. U.S. stock futures inched up 0.3%.
MSCI's broadest index of Asia Pacific shares outside Japan was up 0.3%, after rising as much as 0.7% earlier. It climbed nearly 12% in the first quarter.
Japan's Nikkei average rose as much as 1.1% to approach the one-year high hit last week, after climbing more than 19% in the first three months of 2012.
"The Chinese reading was much better than most were expecting and that optimism has flown into risky assets now. If China is still in a big growth stage then Australian commodities will be in demand," IG markets strategist Stan Shamu said.
Data on Sunday showed China's official Purchasing Managers' Index (PMI), which covers large factories, jumped to an 11-month high of 53.1 in March, beating forecasts.
While the official PMI soothed doubts about China's resilience, a private sector survey of smaller factories by HSBC raised concerns that small manufacturers were struggling and contributed to a fizzling of a rally in riskier assets.
The Australian dollar soared more than a full U.S. cent to a peak of $1.0470 before sliding back to $1.0387.
South Korea's manufacturing sector growth accelerated to a one-year high in March as new export orders continued to expand, a purchasing managers' survey showed on Monday.
The holiday-shortened week may slow trading, with Shanghai markets closed through Wednesday while European, U.S. and some Asian markets will be closed on Friday for the long Easter weekend.
REGIONAL GROWTH DISPARITY
Recovery signs were more evident in the United States and Japan, where reconstruction demand from last year's devastating earthquake is expected to take shape, but risks of slowdown are rising in China and the euro zone, said Kazuto Uchida, an executive officer and general manager of the global markets division at the Bank of Tokyo-Mitsubishi UFJ in Tokyo.
"China's domestic investment is undergoing cyclical adjustments while exports to Europe are decelerating, and growth is expected to remain sluggish through autumn. A political disorder could raise the odds of a hard landing, but at this moment, the main scenario is for a cyclical slowdown," he said.
Credit Suisse said it was upgrading its view of Japan to "tactical overweight", saying Japan is "typically a late cycle play" and recommending a focus on Japanese stocks with U.S. exposure. Credit Suisse added it continued to overweight Italy, and domestically focused German stocks, but underweight Spain and domestic France.
The euro steadied at $1.3338 from Friday's broad rally after budget cuts in Spain boosted hopes the country could stick to an austerity path and euro zone finance ministers agreed to beef up the region's financial firewall to prevent its debt crisis from spilling wider.
Oil prices extended gains, with U.S. crude futures up 0.2% to $103.22 a barrel while Brent rose 0.2% to $123.18 a barrel. Oil was underpinned by the growing threat of a disruption of Iranian exports.
