Tokyo - Asian shares rose on Monday as weaker-than-expected US growth data left open the possibility for more monetary stimulus from the Federal Reserve, but trading was subdued with Japanese and Chinese markets closed.
MSCI's broadest index of Asia-Pacific shares outside Japan added 0.6%, drawing support from Australian shares which rose 0.7% on strength in the mining sector after copper prices hit a three-week high on Friday.
At current levels, the pan-Asian index was set for a 0.1% monthly gain, after suffering a 3.2% drop in March.
The Australian equities market "has been pushing to exceed recent highs in anticipation of lower domestic interest rates and a soft landing for China's economy," Ric Spooner, chief market analyst at CMC Markets, said.
Early on Monday, a private gauge of Australian inflation showed price pressures remained well contained in April, further supporting views that the Reserve Bank of Australia, when it meets on Tuesday, will reduce its cash rate a quarter point to 4% - which would be its first easing since December.
Global stocks ended higher on Friday on strong earnings reports, while the dollar dipped as data showed growth in the US economy cooled in the first quarter to a 2.2% annual growth rate, below a 2.5% forecast, feeding views that the Fed could ease policy further to boost growth.
Growth prospects were also clouded in Asia, with the region's fourth-largest economy, South Korea, on Monday reporting industrial output fell a seasonally adjusted 3.1% in March from February.
This followed weaker-than-expected first-quarter results on Friday from China's Big Four banks, highlighting a sector that faces growing pressure from a slowing economy and higher funding costs.
The dollar stayed under pressure on Monday, pushing the yen to a fresh two-month high of ¥80.10. The euro hovered near its three-week high around $1.3270 hit on Friday.
Currency speculators last week cut their long US dollar positions for a second consecutive week while trimming their short euro and yen positions, according to data from the Commodity Futures Trading Commission released on Friday.
The softer US GDP data has shielded the euro from falling due to problems in the eurozone, with the single currency likely to stay above a key $1.3100 floor as long as Fed officials maintain their stance of keeping low rates until 2014, said Ashraf Laidi, chief global strategist at City Index Group.
The Bank of Japan took further easing steps on Friday which had little lasting effect in weakening the currency.
Analysts say concerns over Europe's debt woes could support demand for the yen, but Japan's own structural problems such as high public debt and deteriorating trade terms would weigh on the currency to weaken the momentum of the yen's climb towards its record high near 75.
Yields on struggling eurozone sovereign debts remained elevated on Friday, although below a critical level, with Spain's 10-year bond yield briefly rising above 6 percent after a Standard & Poor's downgrade of its debt late on Thursday.
Friday's data underscored Spain's economic plight, with nearly a quarter of its work force unemployed.
In a sign of a new German emphasis on growth-boosting measures to ease painful austerity sweeping across the eurozone, German Chancellor Angela Merkel added her voice on Saturday to calls to bolster the European Investment Bank and to use European Union infrastructure funds more flexibly to help spur economic growth in Europe.
Low risk allocations
Asian credit markets were subdued, with the spread on the iTraxx Asia ex-Japan investment-grade index narrowing a tad by two basis points.
Reflecting investor cautions towards risks, EPFR Global said
US bond funds drew in $4.63bn in the week ended April 25 for the 25th consecutive week of inflows and the longest run of gains since mid-2010. Globally, equity funds fared poorly in the week with net redemptions of $7.38bn, EPFR said.
Big Japanese life insurance firms, in a series of interviews with Reuters, said they would continue buying domestic bonds with many sounding cautious about boosting foreign bond purchases, while some expressed interest in emerging market shares in pursuit of returns.
Brent June crude eased 0.2% at $119.57 a barrel while US crude was down 0.2% at $104.74.