(Updates prices)
Asian stocks recovered some losses on Monday and bond yields rose as fears of a wider Middle East conflict ebbed, with investors gravitating back towards riskier assets.
Gold and the safe-haven dollar eased back from near their peaks, and crude oil prices declined as the potential for a major supply disruption waned.
Iran said on Friday that it had no plan to retaliate following an apparent Israeli drone attack within its borders, which in turn followed an unprecedented Iranian missile and drone attack on Israel days before.
MSCI's broadest index of Asia-Pacific shares .MIAP00000PUS rose 0.83% as of 0514 GMT, retracing some of the 1.8% drop from Friday, after news of the Israeli strike emerged.
Pan-European STOXX 650 futures STXEc1 added 0.33%, and FTSE futures FFIc1 advanced 0.8%.
"It seems neither Israel nor Iran want an escalation in the crisis in the Middle East ... and with a subsequent strike from either side not looking like it's coming, investor concerns have eased somewhat," said Kazuo Kamitani, a strategist at Nomura Securities.
However, Kamitani said expectations of later Federal Reserve interest rate cuts and concerns about chip sector earnings will continue to keep investors on their toes.
MSCI's world equities index .MIWO00000PUS suffered its worst week since March 2023 last week, dropping 2.85%. Early on Monday, it was up just 0.05%.
Around Asia, Hong Kong's Hang Seng .HSI jumped 1.94%, Australia's benchmark (xjo) gained 0.92% and South Korea's KOSPI .KS11 climbed 0.82%.
Japan's Nikkei .N225 added 0.56%, underperforming the rest of the region due to a high concentration of chip sector shares, which tracked declines in U.S. peers from Friday. Taiwanese stocks .TWII slipped 0.05%.
Mainland Chinese blue chips .CSI300 declined 0.18% in their first chance to react to new measures announced on Friday aimed at promoting overseas investment in China's technology sector.
U.S. stock futures EScv1 added 0.31%, following a 0.88% drop for the S&P 500 .SPX on Friday.
Bond yields - which climb when prices fall - rose back toward multi-month highs. The 10-year U.S. Treasury yield US10YT=RR climbed 4 basis points to 4.656%, heading back toward the five-month peak of 4.696% reached last week on the view that the Fed would be in no hurry to ease policy amid robust economic data and sticky inflation.
The dollar index =USD , which measures the currency against six major peers, eased 0.05% to 106.05. It was also at a five-month top last week, at 106.51.
Gold XAU= slid 0.95% to $2,367.75, retreating from near the all-time peak of $2,431.29 from last week.
"Failure at $2,400 could hint towards a short-term correction ... followed by an overdue period of consolidation," Saxo strategist Charu Chanana wrote in a client note.
Crude oil fell as traders put the focus back on fundamentals. With a rise in U.S. stockpiles as the backdrop, Brent futures LCOc1 fell 67 cents, or 0.77%, to $86.62 a barrel. The front-month U.S. West Texas Intermediate (WTI) crude contract for May CLc1 , which expires on Monday, fell 63 cents, or 0.76%, to $82.51 a barrel, while the more active June contract CLc2 dropped 64 cents to $81.58 a barrel.
"It looks on the face of it like oil's uptrend may be over, but based on technical levels, until WTI breaks below $80, the uptrend is still in place," said Nomura's Kamitani.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ World FX rates YTD http://tmsnrt.rs/2egbfVhGlobal asset performance http://tmsnrt.rs/2yaDPgn Asian stock markets https://tmsnrt.rs/2zpUAr4
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