Asian stocks inched up to an 11-month high on Monday on mounting evidence that the global economic recovery is picking up speed, giving a boost to oil and copper prices while hurting the safe-haven U.S. dollar.
Two surveys showed Chinese factory growth accelerating in July thanks to a revived domestic economy and slight pick-up in demand for its exports. The China PMI from brokerage CLSA hit a on-year peak.
The U.S. economy shrank at a smaller-than-expected 1 percent on an annualized pace in the second quarter, with economists expecting growth to resume in the second half of the year after the longest contraction on record.
The improving economic backdrop has contributed to an array of upbeat quarterly earnings reports around the world, prompting analyst upgrades to forecasts that are giving investors more confidence to shift funds into equities.
Brokers have done a complete reversal in the last week, with uplifts in forecasts, uplifts in sentiment and commentary and price targets, said Jamie Spiteri, a dealer at Shaw Stockbroking in Sydney.
The MSCI index of Asia-Pacific stocks outside Japan <.MIAPJ0000PUS> edged up 0.5 percent to the highest levels since early September, taking gains on the year to 47 percent.
Shares of automakers and banks were among the biggest gainers.
But Japan's Nikkei share average <.N225> dipped 0.3 percent and pulled back from a 10-month closing high as investors took profits and awaited a slate of earnings reports this week.
Among those releasing results later in the day were Panasonic Corp <6752.T>, Astellas Pharma <4503.T> and Suzuki Motor Corp <7269.T>.
Investors in Japanese stocks can't aggressively buy or sell at this moment as the external environment is holding steady, with U.S. stocks pausing at high levels, said Yutaka Miura, a senior technical analyst at Mizuho Securities in Tokyo.
The dollar hit a 7-1/2-month low against a basket of currencies, hurt by the rebound in commodity prices on hopes the healing global economy will boost demand.
The dollar index, a gauge of its performance against a basket of currencies, was little changed at 78.327 <.DXY> after initially falling to 78.111, the lowest since December.
The commodity-linked Australian dollar jumped to a 10-month high, while the pound struck a nine-month peak against the beleaguered greenback.
U.S. crude oil prices hit a one-month high of $69.75 a barrel, while Shanghai copper futures soared 5 percent.
The run higher in stocks and upbeat data on economic growth have put more pressure on safe-haven government bonds. Korean government bond futures hit a one-month low and extended losses after a report on Friday showed industrial output in June easily beat forecasts.
(Additional reporting by Sonali Paul in Melbourne and Aiko Hayashi in Tokyo; Editing by Kazunori Takada)