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Bangkok - World stock markets regained some vitality on Tuesday as investors hung hopes on action from the Federal Reserve to keep the US from sliding back into recession.
Oil prices rose to near $86 a barrel as traders scaled back expectations that Libyan oil would be quickly restored to world markets as fighting raged in Tripoli between rebels and forces loyal to Gaddafi. The dollar weakened against the yen and the euro.
European shares were higher in early trading. Britain's FTSE 100 rose 1.5% to 5 171.26. Germany's DAX gained 2.8% to 5 625.16 and France's CAC-40 gained 2.7% to 3 132.43.
Wall Street was heading for a second straight day of gains, with Dow Jones industrial futures 1.4% higher at 10 997 and S&P 500 futures 1.7% higher at 1 142.10.
Global stocks have been volatile in recent weeks as investors swung between fears of a double-dip recession in the US and hopes that Federal Reserve Chairperson Ben Bernanke will announce some kind of action to help the economy during an annual economics conference in Wyoming on Friday.
Japan's Nikkei 225 rose 1.2% to close at 8 733.01 and Hong Kong's Hang Seng gained 2% to 19 875.53. South Korea's Kospi jumped 3.9% to 1 772.39.
Benchmarks in Singapore, Taiwan, India, Indonesia and the Philippines were also higher.
Chinese shares advanced for the first time in six trading sessions as investors bargain-hunted following the release of a survey suggesting better than expected manufacturing data for August.
The benchmark Shanghai Composite Index rose 1.5% 2 554.02 and the Shenzhen Composite Index added 1.8% to 1 144.05. Shares in cement and other building materials led the gains.
"A correction was due after investors overreacted to the selloffs in foreign markets days before, and also there was speculation that the manufacturing data could be better than earlier forecast," said Cai Dagui, an analyst at Ping'an Securities, based in Shenzhen.
A "flash" manufacturing survey by HSBC showed Chinese output contracting, but improving from a 16-month low in July, rising to 49.8 from 49.3 in July. The flash survey of purchasing managers includes 85% to 90% of the responses of a monthly survey on manufacturing trends that is usually released on the first of the month.
Investors also found relief in expectations that oil prices would fall if Libyan rebels gain complete control of the capital of Tripoli. A new government in Libya could clear the way for a return to oil production, which was halted six months ago amid a rebellion against the Gaddafi regime.
Falling oil prices also could help mitigate the effects of high inflation that has persisted across much of Asia, threatening growth prospects.
Rising metals prices, especially gold - which ended on Monday just shy of $1 900 an ounce - boosted mining shares. Energy Resources of Australia shot up 7.8%. Australia's Fortescue Metals Group gained 4.1%. Zijin Mining Group, China's biggest gold miner, rose 2.2%.
On Monday, the Dow Jones industrial average rose 0.3% to close at 10 854.65. The S&P 500 rose less than 0.1% to 1 123.82. The Nasdaq rose 0.2% to 2 345.38.
Bernanke's speech on Friday could have a major impact on markets, as it did last year when he hinted that the Fed was about to embark on a second round of bond buying known as quantitative easing to support financial markets and the economy.
The buying programme ended in June. Some investors hope that Bernanke will reinstate bond purchases because of recent evidence of a weakening US economy that triggered a stock market sell-off in August.
Benchmark oil for September delivery was up $1.46 to $85.88 a barrel in electronic trading on the New York Mercantile Exchange. Crude rose $1.86 to settle at $84.12 on Monday.
In London, Brent crude for October delivery was up 15 cents per barrel to $108.57 on the ICE Futures exchange.
The euro rose to $1.4440 from $1.4373 late on Monday in New York. The dollar weakened to ¥76.65 from ¥76.72.
