With the exception of China, Asian markets rose sharply Monday as the U.S. dollar hit a six-month high against the euro and oil briefly slipped below $115 a barrel.
Government bond prices also climbed, suggesting the rally in equities thinly covered darker fears that the impact of the U.S. economic slowdown on the rest of the world may have been underestimated.
Popular trades such as betting against the dollar and financial sector shares while speculating on a rise in oil prices were slashed last week. On Friday the euro recorded its largest single-day decline against the dollar in 7-½ years.
Crude oil was trading above $116 a barrel in the Asian session, rebounding from the previous session's decline on concern that fighting between Russia and Georgia could disrupt energy exports from the Caspian region.
Japan's Nikkei 225 Average climbed 2 percent for its highest close in nearly three weeks as Honda Motor and other exporters gained on a weaker yen and inflation worries took a breather. Lower oil prices also helped concerns about the outlook for corporate profits recede, although the slide in oil hit trading companies such as Mitsubishi hard, causing them to drag on the Nikkei.
South Korea's KOSPI closed higher led by exporters such as LG Electronics, helped by weakness in the won currency, but steelmakers' falls on outlook worries cut earlier gains.
Australian shares finished 0.8 percent higher, with financial firms such as National Australia Bank and Macquarie Group leading gains following a solid performance by U.S. financial stocks at the end of last week, though miners retreated on a fall in base metals prices.
China's Shanghai Composite Index was tanked 5.2 percent to a fresh 19-month lows, hurt by concern about high inflation and a slowing economy. Strong rebounds in some overseas stock markets and falling global oil prices were offset by worries that high producer price inflationand slower economic growth in China would pressure corporate profits. Non-ferrous metals shares were particularly hard hit because of expectations that demand for their products would be hit by China's economic slowdown, and following drops in metals prices abroad. Aluminium Corp of China tumbled over 6 percent. Olympics-related shares dropped, after surging before the games opened on hopes that they might benefit from a surge in consumption due to the Olympics.
Hong Kong shares fell 0.1 percent as resources and shipping stocks such as China Cosco extended steep declines as international commodity prices buckled under a stronger U.S. dollar and the global freight index plunged to its lowest level in five and a half months. Retreating energy prices however helped boost power stocks, which had been falling after profit warnings from four major electricity producers. Huaneng Power and Datang Power both made significant gains.
Singapore's Straits Times Index rose 0.5 percent. Shares of Singapore Airlines and
Neptune Orient Lines climbed, as Friday's sharp fall in oil prices could reduce their operating
costs.