Hopes that Japan is making progress in its battle to control radiation leaks at a nuclear plant boosted stocks on Monday, despite renewed oil price rises following the start of military action against the regime of longtime Libyan leader Moammar Gadhafi.
The improvement in risk appetite was most evident in stocks, where most indexes posted solid gains at the start of the week likely to be dominated once again by developments in Japan and Libya.
Investors' appetite for riskier trades, such as stocks, has been weighed down in recent weeks by the confluence of events around the world. On top of Japan's massive earthquake and subsequent tsunami, investors had to grapple with the potential implications of a nuclear meltdown at the Fukushima nuclear complex.
Over the weekend, Japanese officials reported some progress in their battle to bring the plant under control following near-constant dousing of dangerously overheated reactors and uranium fuel.
The crisis was far from over amid fears over food and water contamination, though investors were clearly relieved that a worst case scenario could be avoided.
"When confronted by a possible nuclear meltdown the absence of further bad news is, indeed, good news," said Adrian Foster, an analyst at Rabobank International.
Though Japanese markets were closed for a national holiday, most Asian markets advanced. The buying followed on into the European session and is expected to continue at Wall Street's open later.
In Europe, the FTSE 100 index of leading British shares was up 1.3 percent at 5,789 while Germany's DAX rose 2.2 percent to 6,812. The CAC-40 in France was 2 percent higher at 3,884.
Similar gains were anticipated when the U.S. opens for trading _ Dow futures were up 1 percent at 11,918 while the broader Standard & Poor's 500 futures rose 1.2 percent to 1,290.
The other main focus in the markets was Libya after coalition forces, including those from the U.S., Britain and France, launched a second wave of strikes to protect civilians from government troops.
The prospect of a longer shutdown in oil production in Libya, which accounts for a little under 2 percent of global crude supplies, caused oil prices to spike higher. A barrel of crude as traded on the New York Mercantile Exchange was up $2.11 at $103.18 while the equivalent Brent rate in London rose $1.94 a barrel to $115.71.
In the currency markets, traders remained reluctant to push the yen higher after last week's decision by the Group of Seven leading industrial countries to intervene in the markets to rein in the export-sapping appreciation of the currency. Last Thursday, the yen rose to an all-time high against the dollar as the currency garnered support from its widely perceived status as a safe haven and as investors repatriated money to pay for reconstruction efforts back home.
By late morning London time, the dollar was up 0.6 percent at 81.32 yen, around 5 yen higher than last week's low of 76.53 yen.
"The key question remains as to whether last weeks concerted buying will be sustainable, or whether the banks have just bought some time for the currency, with perceptions that the 80 level could well be the proverbial line in the sand," said Michael Hewson, market analyst at CMC Markets.
Meanwhile, the euro was firm as the currency remained buoyed by hopes that EU leaders will this week announce a "comprehensive solution" to the debt crisis that has afflicted the single currency zone for the past year. It was trading flat at $1.4166.
Earlier in Asia, Hong Kong's Hang Seng index rose 1.7 percent to 22,685.22, unaffected by an announcement Friday that the People's Bank of China would raise the bank reserve requirement ratio by half a percentage point on March 25. The hike, the third this year and intended to cool lending and inflation, did not rattle markets.
Chinese shares performed less impressively, with the benchmark Shanghai Composite closing 0.3 percent higher at 2,909.1.
South Korea's Kospi index was up 1.1 percent to 2,003.42 and Australia's S&P/ASX 200 gained 0.4 percent to 4,642.80.
Pamela Sampson in Bangkok contributed to this report.