Brent crude was slightly firmer at $114, after shedding more than a $1 a barrel early on Monday.
Gold was down 0.2 percent at $1,392.80 an ounce as concerns about Syria eased temporarily while 10-year German government bonds, another refuge for nervous investors, fell sharply, sending the yield up 6.1 basis points and back towards a 1-1/2 year high hit last month.
Global economy shines
The prospects for the global economy have brightened considerably according to a fresh round of purchasing managers' surveys (PMIs) for August, which provide a guide to future levels of economic activity.
PMIs for China indicated activity in the country's vast manufacturing sector was at its highest levels in more than a year, easing investor concerns that the world's No. 2 economy was on course for a sharp slowdown this year.
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Euro zone factory activity rose at its fastest pace in over two years, and manufacturing in struggling Spain grew for the first time since April 2011. The data added to recent evidence of recovery in the currency bloc, though the gains were modest and unemployment remained stubbornly high.
Elsewhere, India notably bucked the improving trend. Factory activity in Asia's third-largest economy shrank in August for the first time in over four years, putting further pressure on the battered rupee and adding to the country's economic malaise.
"Just about the whole world seem seems to be surprising on the upside on PMIs except India," Mike Ingram, market commentator at BGC Partners, said.
The data halted a two-day rebound in the rupee, which edged down 0.3 percent to 65.90 to the dollar and was not far from a record low of 68.80 per dollar hit last week.
MSCI's world equity index was up 0.6 percent, after four consecutive weekly losses during which investors positioned for the U.S. Federal Reserve to begin trimming its monetary stimulus, perhaps at its meeting later this month.
Tokyo's Nikkei index rose 1.4 percent and European shares posted their biggest daily percentage gain in two months, rising 1.7 percent by mid-morning, as the upbeat economic data pushed investors into mining stocks.
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UK factory data was noticeably bullish, with the UK manufacturing PMI hitting a near 20-year high, sending Britain's FTSE 100 index up 1.5 percent.
"The UK's factories are booming again ..., as rising demand from domestic customers is being accompanied by a return to growth of (its) largest trading partner, the euro zone," said Rob Dobson, senior economist of the index's compiler Markit.
Wall Street will be closed for the Labor Day holiday. That is likely to keep activity in check, with many investors wary of taking action ahead of major central bank meetings later in the week and the all-important U.S. payrolls report on Friday.
The reduced risk of an imminent U.S. attack in Syria dented demand for the Japanese yen, which is often sought for its safety in a time of crisis. That helped spur the dollar to 99.27 yen, up 1.1 percent and its highest level in a month.
The U.S. dollar index, which tracks the greenback against six major currencies was largely flat though at 82.10.
The brighter economic news from China lifted the Australian dollar, which is seen as a proxy for Chinese growth because of the two countries' close trade ties. It rose 0.8 percent to $0.8970. Copper prices, also buoyed by the factory data from top-consumer China, jumped 2 percent to $7,235 a metric ton (1.1023 tons) after a four-day losing streak.