Asian shares advanced on Monday as market players scooped up beaten-down stocks after heavy losses last week, while oil prices jumped more than $2 as Western forces struck targets in Libya.

Regional stocks had just been picking up after a sell-off in recent weeks because of a combination of inflation, higher oil prices and frothy valuations, when the March 11 earthquake and tsunami in Japan dealt them another blow.

But the latest plunge has brought equity valuations within the region to average levels and markets particularly in North Asia are attractive, said Markus Rosgen, head of Asia ex-Japan strategy at Citigroup.

From a technical perspective, Asia-ex Japan is very oversold. Much of the bad news is in the price of Asian equities and monetary policy is not hugely restrictive, said Rosgen, who predicts the MSCI ex Japan at 675 points by the end of the year, a gain of nearly 50 percent from current levels.

Investors may also have been reassured by reports of progress in repairs at a crippled Japanese nuclear power plant, and by comments by billionaire investor Warren Buffett that the recent steep drop in Japanese stocks presented a buying opportunity.

The Nikkei <.N225> plunged 10 percent last week as the nuclear crisis worsened, pulling shares in the rest of Asia down nearly 3 percent and weighing on markets in the United States and Europe, including riskier assets such as oil.

On Monday, the MSCI index of Asian shares outside of Japan <.MIPAJ0000PUS> was up nearly 1 percent though investors kept a wary eye on the battle by Japanese authorities to contain deadly radiation from crippled nuclear plants and a rising death toll following the earthquake and tsunami earlier this month.

For the quarter so far, Asian-ex Japan is down nearly 5 percent, underperforming its counterparts in Europe and the United States.

Japanese markets were closed on Monday for a holiday.

OIL UP

Brent oil futures jumped more than 2 percent at one point in early trade, topping $116 per barrel, after Western warplanes and missiles hit Libya at the weekend in a bid to force leader Muammar Gaddafi to cease fire on rebels and end attacks on civilians.

Unrest in Syria and Yemen over the weekend also kept traders on edge.

With a good chunk of Japan's nuclear power capacity likely knocked out for good, its reliance on fossil fuels such as oil and natural gas will increase, preventing oil prices from retreating sharply from current even if the Libyan conflict is resolved swiftly. So far this quarter, oil is up by more than a fifth.

Higher fuel prices will revive investors' concerns about inflation and the prospect for further interest rate increases, especially in emerging economies.

I can see uncertainty and fear driving the price of oil higher in the short term, said Matthew Lewis, an analyst at CMC Markets in Sydney.

The slight undertone of caution pushed safe haven plays like gold higher although it stayed well below its record high hit earlier this month.

In currency markets, the yen stabilized after surging by nearly 4 percent versus the dollar on Friday, riding on the back of the first G7 joint intervention in over a decade.

Some indications that further intervention may be needed to hold up the Japanese currency were evident with the dollar last trading at 80.85 yen, retreating from a high of 82.00 on Friday.

In China, interest rate swaps rose while stocks and the yuan advanced after the central bank unexpectedly raised banks' reserve requirement ratios for the third time this year after markets had closed on Friday.

(Additional reporting by Ian Chua in SYDNEY and Alejandro Barbajosa in SINGAPORE; Editing by Ramya Venugopal)

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