Stocks and commodities rose from last week's lows on Monday after solid U.S. payrolls data showed the economic recovery in the world's biggest economy was picking up momentum, though big gains may be limited as some sellers may be waiting for a sharper bounce to take profits.
In a sign that markets were still cautious, European shares are set to open between 0.6 to 0.9 percent lower, according to financial bookmakers.
Hiring by U.S. companies quickened to its fastest pace in five years in April, a report showed on Friday, helping the dollar gain versus the euro and heavily sold commodities like silver and oil retrace some of their losses.
Certainly Friday felt like the end of the panic liquidation, said a metals trader at an Australian bank in Sydney.
While last week's violent moves were seen more driven by unwinding of speculative positions rather than a sudden weakening of the otherwise favorable global economic outlook, traders said the sheer scale of the decline may introduce more two-way volatility into the market in the near term.
The Reuters-Jefferies CRB index <.CRB>, a global benchmark for commodities prices, suffered its biggest weekly drop since late 2008 while silver and crude oil registered record single-day falls on Thursday.
Two days before the U.S. jobs data, redemptions spearheaded by institutional investors in commodity funds hit their highest weekly total on record with funds focusing on gold and precious metals heavily hit by outflows, fund-tracker EPFR Global said.
On Monday, though, prices of copper, wheat and oil rose, with the latter boosted by intensifying conflict in Libya.
When you see a 30 percent retracement in the likes of silver, you will see some buying, but we are now entering a period of more two-way action as opposed to earlier when you bought commodities and watched it go higher, said Andrew Robinson, a macro, commodities and FX analyst at Saxo Markets.
BOON FOR GROWTH
Even as Brent crude rose above $110 a barrel after losing $16 last week in its biggest ever decline in dollar terms, Deutsche Bank's Alan Ruskin said the temporary benefit of the sharp drop in oil prices along with the jobs data should prove to be a short-term boon for global growth.
This is because the growth impact of lower energy prices for major energy consumers like the United States and China will overwhelm the negative growth implications for energy producers.
The bounce in commodities also boosted the region's stock markets.
Australia's benchmark index <.AXJO> ended 0.3 percent higher while Hong Kong's stocks <.HSI> rose nearly a percent, led by energy and banking counters. Japanese <.N225> stocks ended down.
MSCI's index of Asia Pacific shares outside Japan <.MIAPJ0000PUS> was up nearly 1 percent before pulling back somewhat. It fell nearly 3 percent last week.
We have probably seen the worst of the unwinding last week, said Wing Fung Financial Group analyst Mark To.
We will see a rebound today, but it's too soon to say whether today is the beginning of an uptrend with people waiting on China inflation data due on Wednesday.
Beijing is expected to release April inflation data this week with economists polled by Reuters expecting the figure to come in slightly lower on falling food costs.
In currency markets, the euro was under pressure after posting its biggest weekly loss versus the dollar due to the deepening euro zone debt problems.
While Greece has denied speculation it is quitting the euro zone, the European Union is under pressure to renegotiate its financial bailout, with an Irish minister saying any concessions given to Athens should mean better terms for Dublin as well.
The single currency was last at $1.4415 on short-covering, after having slumped to a three-week low around $1.4308, and is now well below a 17-month peak above $1.4900 hit last week.
A revival in demand for risky assets saw demand for safe haven instruments such as bonds cool with ten-year Japanese bond yields edging a shade higher to 1.14 percent.
US Treasuries weakened slightly as traders took profits after Friday's drop which was fueled by speculation of Greece's exit from the euro zone economy. Ten-year yields were up by three basis points to 3.18 percent.