Asian stocks rose on Monday as investors greeted news of Egyptian President Hosni Mubarak's resignation with relief, while U.S. crude steadied near $85.50 per barrel after falling to 10-week lows as geopolitical tensions eased for now.

Mubarak handed power over to the army, bowing to escalating pressure from the military and protesters demanding he goes. His departure was seen partially reviving investors' appetite for risk.

This also helped copper climbed above $10,000 a tone, while the dollar came under some pressure.

The Nikkei <.N225> climbed 0.8 percent after data showed Japan's economy shrank slightly in the final quarter of last year but beat forecasts for a bigger contraction. Analysts expect a recovery this year on stronger exports to China and other parts of fast-growing Asia.

What with good corporate earnings, the resignation of Mubarak and other helpful factors, the investment environment is good, said Yoshihiro Ito, chief strategist at Okasan Online Securities.

Stocks elsewhere in Asia <.MIAPJ0000PUS> gained 1.2 percent with Australia's S&P/ASX 200 index <.AXJO> up 1.0 percent. South Korea's KOSPI <.KS11>, Hong Kong's Hang Seng Index <.HSI> and China's Shanghai Composite index <.SSEC> were all more than 1 percent higher.

Talk of slower-than-expected inflation in China, a day ahead of the official release, also helped shore up the Chinese market.

Traders said the consumer price index may have risen 4.9 percent in the year to January, well below the consensus forecast of 5.3 percent.

Last week, the MSCI Asia Pacific equity index, excluding Japan, fell 2.65 percent, suffering its biggest weekly drop since August 2010.

Questions over whether officials in emerging economies will succeed in tackling inflation have prompted investors to pull out some $3 billion from Emerging Markets Equity Funds tracked by EPFR Global in the week ended February 9.

This marked a third straight week of outflows and was the worst three-week run in three years, the fund tracker said.

But Japanese equities, which lagged the region last year, saw some of the best inflows. Japan still has a low price-to-book ratio of 1.2, according to Thomson Reuters StarMine, among the most attractive in Asia. This compares with 2.0 for Hong Kong and 2.5 for Australia.

Investors are seeing value in Japanese exporters geared to fast growing regional emerging markets where the yen's value versus the dollar is not an issue. Inflation is also not an issue for the world's third largest economy, the fund tracker said.

The dollar slipped against the euro and the yen. Traders said Japanese exporters have been active sellers of the greenback, taking advantage of the dollar's rise to three-week highs late last week.

The dollar index <.DXY>, which tracks the greenback's performance against a basket of major currencies, slipped 0.14 percent.

U.S. crude oil was a touch firmer at $85.60, but still not far off a 10-week low of $85.10 plumbed last Friday. Spot gold was little changed at $1,357.20 an ounce.

(Additional reporting by Taiga Uranaka in Tokyo; Editing by Daniel Magnowski)

Australia China Japan South Korea