The Australian dollar surged to a eight-month high on Friday on the back of rising raw material prices, while crude oil matched a six-month high above $65, up some $4 this week on hopes that a global economic recovery will spur energy demand.
Higher commodity prices this week, which have also been propped up by the falling U.S. dollar, supported mining and energy-related stocks in Asia, though investors were reluctant to take big bets on increasingly expensive shares until more evidence emerged of a sustained recovery.
Major European stock markets opened up as much as 1.2 percent, according to financial bookmakers, underpinned by rising commodity prices. U.S. stock futures rose 0.1 percent, pointing to a higher open.
Growing confidence that the global economy has seen the worst of the financial crisis and that some struggling Asian economies will return to growth in the second quarter have supported equity markets since early March and pushed up raw materials prices.
Copper traded on the London Metal Exchange was headed for a fifth consecutive month of gains.
We are getting some better numbers and the currency markets are supporting metals prices, said Mark Pervan, ANZ Bank's senior commodities analyst.
We may now be looking at a W-shaped recovery. We are in the first V, and another is to come though, I don't think it will be as steep as the first.
The ICE Futures U.S. dollar index <.DXY>, a measure against six other major currencies, fell 0.4 percent, within sight of a five-month low plumbed a week ago.
The U.S. dollar was down 0.2 percent to 96.70 yen, though was still up 1.9 percent in May, the biggest monthly gain of the year, with Japanese investors finding value mostly in foreign bond markets.
The yen got a boost after data showed Japanese industrial production rose 5.2 percent in April on a monthly basis, the largest monthly gain since 1953, and the government expected continued gains through June.
The Australian dollar bolted to a eight-month high at US$0.7931. Higher commodity prices and evidence of an economic strength in China have launched the Australian currency for the last three months, making it a proxy for global growth prospects.
COMMODITY BULLS ON PARADE
The Reuters-Jefferies CRB index <.CRB>, a global commodities benchmark, was up 12.3 percent in May, on its way to the biggest monthly gain since July 1974.
Gains in commodities reflect continued recovery of demand outlook from its collapse after Lehman's bankruptcy triggered concerns of a depression, said Dariusz Kowalczyk, chief investment strategist with SJS Markets in Hong Kong.
Medium-term outlook remains positive for commodities and other risky asset classes as we continue to expect that U.S. GDP will start to expand in Q3 and several major Asian economies already in Q2, he said in a note.
A 1.7 percent rise in Australia's benchmark S&P/ASX 200 equities index <.AXJO> led modest gains across Asia's stock markets.
Japan's Nikkei share average <.N225> rose 0.75 percent to a seven-month high, having punched above its 200-day moving average earlier in the week.
Data showed Japan's industrial output jumped 5.2 percent in April, much more than expected and the second straight month of increases, as companies continue to restock after a heavy run-down of inventories late last year. But output was still less than two-thirds of a year earlier, and it is still not clear if there has been a return to sustained consumer demand necessary for a global economy recovery.
Hong Kong's Hang Seng index rose 1 percent <.HSI> after opening at an eight-month high, helped by a 4.2 percent gain in shares of offshore oil firm CNOOC Ltd <0883.HK>.
The MSCI index of Asia Pacific stocks outside Japan rose 1.6 percent to its highest since October 3, on its way for a third consecutive month of double-digit percentage gains.
Asia has continued to lead a global equity rally that began on March 9. The MSCI index has surged 52 percent since March 9 while the all-country world index has climbed 34 percent.
U.S. oil for July delivery rose 0.55 percent to $65.44, matching the highest levels since early November reached on Thursday, after OPEC held production at current levels.
Oil is set for the biggest monthly percentage increase in May since March 1999.
The Organization of the Petroleum Exporting Countries kept output targets unchanged on Thursday, as expected, betting on a strengthening world economy and tentative signs of increased demand to boost oil prices.
(Additional reporting by Nick Trevethan in SINGAPORE)
(Editing by Kim Coghill)