Tokyo: Asian stocks rose on Monday after Wall Street rallied on an easing of tensions in Ukraine, although conflicts in other geopolitical hotspots such as Iraq limited gains.
Wall Street surged on Friday after Russia said it had finished military exercises in southern Russia, which the United States had criticized as a provocative step amid the Ukraine crisis.
MSCI`s broadest index of Asia-Pacific shares outside Japan was up 0.7 percent after shedding 0.9 percent on Friday.
Tokyo`s Nikkei rose 1.9 percent, and also was helped as the yen`s sharp rally against the dollar on Friday was reversed. The index had lost 3 percent on Friday.
U.S. stock futures pointed to a slightly firmer open on Wall Street later in the day.
But Asian investors were wary of piling back into riskier assets as the situation in Iraq was marked by an increasing death toll and new U.S. air strikes.
"We are seeing investor sentiment caught between positive U.S. economic fundamentals and psychological negatives, like geopolitical risk. Investor sentiment is easily swayed under such a situation, which could lead to higher volatility and market turbulence," said Koji Fukaya, president at FPG Securities in Tokyo.
The dollar, which suffered heavy losses against the safe-haven yen last week after U.S. President Barack Obama authorised air strikes in Iraq, stood steady after rebounding sharply late Friday as the Ukrainian news arrested the slide in U.S. Treasury bond yields.
Some observers saw the correlation between lower Treasury yields and weaker dollar loosening amid the latest phase in geopolitical tensions.
Kathy Lien, managing director at BK Asset Management, said heightened geopolitical uncertainty makes Treasuries more attractive to investors and central banks looking to park their money in such safe havens, with their demand supporting the greenback.
"Geopolitical uncertainty is clearly driving risk appetite and the conflicts abroad has made U.S. assets very attractive," she wrote in a note to clients.
The dollar was up 0.1 percent at 102.13 yen after touching a low of 101.51 on Friday.
The euro stood little changed at $1.3400.
The benchmark U.S. Treasury 10-year note yielded 2.432 percent, having pulled back from a 14-month low of 2.349 percent struck Friday.
In commodities, London copper edged up as appetite for risk grew following the move by Russia that soothed tensions over the Ukraine, while optimism over the outlook for China`s economy underpinned demand.
Three-month copper on the London Metal Exchange climbed 0.4 percent to $7,025.00 a tonne.
Gold was off to a muted start to the week as equity markets firmed, but the safe-haven metal held above $1,300 an ounce threshold as the geopolitical situation in the Middle East remained tense.
Spot gold was flat at $1,308.20 an ounce after hitting a three-week high of $1,322.60 on Friday.
First Published: Monday, August 11, 2014, 08:49