Asian shares hit seven-month high but some see pullback

For now, traders focused on a smaller-than-expected number of job losses in the United States that reinforced expectations that the global economy, while still weak, may have hit bottom. Increased optimism about the global financial system is also feeding the rally.

European shares were set to gain ahead of results from bellwether HSBC <0005.HK>, while oil prices retreated a tad from the 6-months highs above $58 a barrel hit on Friday.

The gains in stock markets -- with the MSCI's index of Asia-Pacific stocks outside Japan <.MIAPJ0000PUS> up 52 percent since their 2009 low hit in early March -- are also sparking a plunge in risk premiums in Asian credit levels.

The index gained 0.7 percent on Monday as of 0635 GMT (2:35 a.m. EDT) marking a sixth consecutive session of gains. Current levels are still some 50 percent below the record high for the index hit in early November 2007.

But some analysts are warning stock markets may be due for a pullback, given that corporate results remain weak, as seen by the steep loss announced by Toyota Motor Corp <7203.T> on Friday, while any recovery in the global economy is unlikely to be swift.

"It seems that money inflows in Asia have started to slow down and there is profit taking around the region. I believe the market could see its half-year peak before the end of May," said Steve Cheng, associate director at Shenyin Wanguo.

Helping inspire investors was data on Friday showing U.S. employers cut a smaller-than-expected 539,000 jobs in April, even though the unemployment rate soared to 8.9 percent, the highest since September 1983.

The rally in U.S. banking shares after the release of results of stress tests in the sector is also feeding the rally.

Another key component of the rally in Asia has been signs of an economic recovery in China, with the country set to post key data this week including exports and industrial output.