Asian shares climbed to a six-month high on Monday, as hopes that the global economic downturn is nearing its bottom spur demand for riskier assets while hitting the yen and safe-haven government bonds.

European shares also traded higher, with the pan-European FTSEurofirst 300 <.FTEU3> index of top shares gaining 1 percent in early trade.

Economic recovery hopes lifted oil prices by almost $1 per barrel, while Japanese bonds fell, sending the benchmark 10-year yields to a 4- month high and the yen slid to their lowest since mid-October against the dollar and the euro.

Riskier and higher-yielding currencies such as the Australian and New Zealand dollars rose, reflecting improved risk appetite.

North Korea's launch of a rocket on Sunday had little market impact, given that the action had been expected and is seen having limited economic implications.

Instead, investors saw a silver lining in recent bleak data, and expectations that the global economy may not get any worse are spurring some analysts to call for sustained gains in equity markets over the near-term.

A key U.S. jobs report on Friday showed unemployment soared to 8.5 percent last month, or a 25-year high, but markets found comfort in the fact that the numbers came in just as expected.

In Europe, the euro zone's dominant service sector contracted sharply again in March, but not as rapidly as in February, a private survey showed on Friday.

The global market sentiment has changed quite dramatically in the past few days after the U.S. data and the G20 summit, said Alex Tang, head of research with Core Pacific-Yamaichi International in Hong Kong.

Also data from China still suggests a solid recovery in the economy, he said, adding he expected more gains in the Honk Kong index.

The MSCI index of Asia-Pacific stocks outside Japan <.MIAPJ0000PUS> rose 1.8 percent as of 1:50 a.m. EDT, after earlier touching its highest since October 16.

That marked a fifth consecutive session of gains and a rise of more than 30 percent since the gauge hit their 2009 low on March 4.

Japan's Nikkei average <.N225> gained 1.2 percent to a three-month closing high.

Other Asian indexes also rose to multi-month highs, although earlier stronger gains were pared in the afternoon.

South Korea's main index <.KS11> rose 1.1 percent after earlier touching its highest since mid-October, and Hong Kong <.HSI> shares rose 2.1 percent.

Global stock markets have rallied last month on expectations that a worldwide combination of steep interest rate cuts, stimulus measures, and outright bailouts of some industries will eventually pull the global economy out of its worst slump since the 1930s.

G20 world leaders last week met in London and set out a $1.1 trillion package to help revive the global economy, further giving confidence to investors that policy makers will continue to aggressively tackle the world recession.

U.S. Federal Reserve Chairman Ben Bernanke on Friday said the U.S. central bank will continue to use the unorthodox methods it has resorted during the financial crisis to settle markets and set the stage for a resumption of growth.

YEN CARRY TRADES?

There is still a measure of caution in markets ahead of January-March U.S. corporate earnings reporting season, that unofficially kicks off with aluminum producer Alcoa Inc releasing results on Tuesday.

But the tentative return of confidence weighed on the yen, a currency that tends to strengthen with bouts of market uncertainty, partly because investors sell the low-yielding Japanese currency to buy higher-yielding assets in what is called a carry trade.

The yen seems to be becoming the easiest to secure in the market now, compared with the dollar and euro. A move may be emerging in which speculators use the yen to fund investments in other currencies and assets, said Mitsuru Saito, chief economist at Tokai Tokyo Securities.

We can probably say a mini yen carry trade is back, Saito said.

The dollar rose as far as 100.93 yen on trading platform EBS, its highest since October 21, before edging back to 100.72 yen, up 0.4 percent from Friday. The euro at point reaching 137.05 yen on EBS, the highest since October 20.

The New Zealand dollar jumped more than 2 percent at one stage to a five-month high above 60 yen, and the Australian dollar gained 1.3 percent to a six-month peak of 72.74 yen, according to Reuters data.

However, the dollar lost some ground against other currencies, with a gauge of its performance against six major currencies <.DXY> down 0.3 percent.

The South Korean won ended local trade up 2.4 percent to hit a three-month closing high at 1,308.9/9.6 against the dollar on Monday tracking the rally in equity markets.

Oil prices also rose with U.S. light crude for May delivery up 94 cents at $53.45 and analysts said markets might take aim at $55 if stocks rally continued.

Safe-haven gold fell to $877.95 from its New York notional close of $892.50 on Friday. Government bonds also weakened, with Japanese benchmark yields at more than four-month highs.

The U.S. benchmark 10-year note fell 2/32 to yield 2.902 percent, while Japanese June 10-year futures fell 0.41 point to 137.00 after hitting their lowest since November 10. The benchmark 10-year yield touched 1.440 percent, its highest since November 20.

Japan China South Korea Ben Bernanke