Asian markets rallied and the dollar weakened on Monday as a closely watched US inflation gauge dipped in April, reviving hopes that the Federal Reserve will cut interest rates this year.
News that the personal consumption expenditures (PCE) index slowed month-on-month to its lowest level since December provided a much-needed boost to investors' sentiment after a recent pull-back.
Still, the report also showed no change from March on a year-over-year basis, and analysts said the US Fed was unlikely to make its decision based on one batch of data, with decision-makers previously warning they were cautious about cutting too early.
Attention now turns to the Friday release of US jobs data, which will provide the latest snapshot of the world's top economy. Fed officials have said that an easing of the labour market was crucial for them to feel confident enough to loosen monetary policy.
"We are starting to see some softer data come out" in the United States, Nikko Asset Management's Naomi Fink told Bloomberg.
"If we can kind of see a gradual disinflation then I think we will probably have a pretty good outcome for global markets."
UBS Group's Solita Marcelli added that the "data continue to underpin our base case soft landing scenario".
"This should allow the US central bank to start policy easing later this year, most likely at its September meeting, in our view," she said in a note.
The PCE report came after figures showed eurozone inflation topped forecasts in April, though observers were still optimistic the European Central Bank will cut rates this week.
The Dow and S&P 500 ended Friday with healthy gains, though the Nasdaq was flat.
Asian investors started the week in buoyant mood, pushing Hong Kong up more than two percent thanks to a surge in Chinese tech firms, while Tokyo, Shanghai, Sydney, Seoul, Singapore, Manila, Taipei and Jakarta were also well up.
Mumbai futures rallied as exit polls suggested India's Prime Minister Narendra Modi was on course to win a third successive term with a landslide that commentators said would give him the ability to push through fresh economy-boosting measures.
Bets on US interest rates coming down weighed on the dollar against its peers, with the yen supported by speculation the Bank of Japan will lift borrowing costs again, having done so in March for the first time in 17 years.
Oil prices fluctuated after OPEC and other major producers said they maintain output levels by start unwinding cuts, even as questions about China's economic recovery and a spike in US stockpiles cause investors to fret over demand.
Tokyo - Nikkei 225: UP 0.9 percent at 38,849.65 (break)
Hong Kong - Hang Seng Index: UP 2.7 percent at 18,552.99
Shanghai - Composite: UP 0.2 percent at 3,094.00
Dollar/yen: DOWN at 157.05 from 157.30 yen on Friday
Euro/dollar: UP at $1.0858 from $1.0852
Pound/dollar: UP at $1.2752 from $1.2745
Euro/pound: UP at 85.15 from 85.12 pence
West Texas Intermediate: UP 0.4 percent at $77.30 per barrel
Brent North Sea Crude: UP 0.4 percent at $81.41 per barrel
New York - Dow: UP 1.5 percent at 38,686.32 (close)
London - FTSE 100: UP 0.5 percent at 8,275.38 (close)
