The dollar jumped higher against the yen and Japanese stocks led a rise in world shares on Monday as signs of economic momentum in the United States and Japan outweighed worries about a slowdown in China.
Continue Reading Below
A central bank forecast that the French economy will grow slightly in the second quarter and a pickup in euro zone investor sentiment for June also added to the positive outlook.
But markets are still fixated on the timing of a potential slowdown in the Federal Reserve's bond-buying programme and are likely to remain volatile after U.S. data last week, including the key jobs report, did little to change expectations.
"(The jobs data) hasn't changed the market's view much on the timing of Fed tapering," said Kasper Kirkegaard, currency strategist at Danske Bank.
With the United States continuing to drive a world economic recovery, the dollar rose 1 percent to 98.56 yen, recovering some 3.5 percent from Friday's low of 94.98, which was its weakest level since April 4.
The yen weakness and data showing Japan's economy grew 1.0 percent in January-March, revised up slightly from a preliminary estimate, lifted the Nikkei index 4.9 percent for its biggest one-day gain since March 2011.
Continue Reading Below
The Nikkei has now swung by more than 3 percent on all but two of the last 11 sessions, five of those by more than 4 percent, making it one of the most volatile periods since the height of the financial crisis at the end of 2008.
Analysts and traders will now scrutinise forthcoming U.S. data for clues on the timing of the potential tapering. The Bank of Japan's policy meeting this week will meanwhile be watched for any signs of further stimulus measures.
Weak industrial output and trade data from China over the weekend dented sentiment across other Asian markets outside Japan and undermined gains in European shares in early trade.
MSCI's broadest index of Asia-Pacific shares ended down 0.35 percent while Europe's FTSEurofirst 300 index, which initially fell on the Chinese data, recovered to be little changed by mid-morning.
The combination of solid U.S. data and soft Chinese figures also gave investors an incentive to sell higher-yielding, growth-linked currencies like the Australian dollar, which hit a 20-month low against the greenback of 93.93 U.S. cents.
Key commodity prices also suffered from the signs of weaker Chinese demand. Brent crude dipped toward $104 per barrel and copper touched a three week low of $7,146 a tonne.