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Singapore - 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 US 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%. US 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 US cent to a peak of $1.0470 before sliding back to $1.0387.
"Investors will watch PMI readings from other regional economies ... If they also improve, the story of Asia regaining momentum in Q2 would provide more lasting support for markets," said Credit Agricole CIB in a research note.
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.
Later in the session, US and European manufacturing data will be released, offering clues on global factory activity.
The holiday-shortened week may slow trading, with Shanghai markets closed through Wednesday while European, US 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 eurozone, 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.
"A rise in stocks and bond yields is likely to continue through around May on signs of US economic recovery, but the eurozone's deteriorating economy and underlying sovereign credit risks will return to hurt investor sentiment and weigh on the euro again," Uchida said. He added that positions based on pessimism had largely been cleared in the first quarter, making markets more vulnerable to renewed risk-aversion.
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 US 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 eurozone finance ministers agreed to beef up the region's financial firewall to prevent its debt crisis from spilling wider.
It remained unclear, however, if Europe's G20 partners would see the boost as sufficient to fortifying the safety net.
Oil prices extended gains, with US 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.
Asian credit markets firmed, with the spread on the iTraxx Asia ex-Japan investment-grade index tightening by 5 basis points.
