Asian shares bounced to snap a five-session losing streak on Monday as a strong fix for China's yuan eased devaluation concerns and Shanghai stocks returned from the Lunar New Year holidays with only modest losses.
The Shanghai Composite Index eased 2.2 per cent in its first session since February 5, a relatively benign move given the wild swings seen worldwide recently.
More troubling were the January readings on Chinese trade which showed exports fell 6.6 per cent in yuan terms from a year earlier, while imports dived 14.4 per cent.
Still, rallies in European bank stocks and on Wall Street on Friday helped soothe jitters enough for MSCI's broadest index of Asia-Pacific shares outside Japan to rise 1.2 per cent. That follows a loss of almost 4 per cent last week.
E-Mini futures for the S&P 500 added 0.7 per cent, while the cash market is closed on Monday for a holiday.
Japan's Nikkei jumped 4.7 per cent to retrace some of last week's 11 per cent drop, the largest such fall since 2008, though sentiment remained fragile.
"Although we consider the violent risk-off move of recent weeks largely unwarranted by economic fundamentals, the sheer magnitude of the sell-off has raised the risk that market volatility could feed back into the real economy," said Ajay Rajadhyaksha, an economist at Barclays.
"Central banks have very limited ability to ride to the rescue of risk assets."
Barclays pointed to three sources of volatility that had potential negative feedback loops: lower oil prices, capital outflows and macroeconomic weakness in China, and pressure on European banks.
"Of these, we consider China the biggest medium-term risk, but the least immediate issue," wrote Rajadhyaksha.
Indeed, the People's Bank of China (PBOC) took the opportunity of the US dollar's recent decline to fix its yuan at its highest in over a month on Monday, hoping to deflect speculation about a possible devaluation.
In an interview over the weekend, PBoC Governor Zhou Xiaochuan said there was no basis for the yuan to keep falling, and China would keep it stable versus a basket of currencies while allowing greater volatility against the US dollar.
Figures out over the weekend suggested there was still life in the Chinese consumer with retail sales growing 11.2 per cent during the week-long Lunar New Year vacation compared with the same holiday period last year.
Retail figures from the United States out on Friday had also been relatively upbeat and helped calm market jitters a little.
The Dow ended Friday with a gain of 2 per cent, while the S&P 500 added 1.95 per cent and the Nasdaq 1.66 per cent. The rally snapped a five-day losing streak, but all three indices were still down on the week.
Global oil prices had also surged as much as 12 per cent on Friday after a report once again suggested OPEC might finally agree to cut production to reduce the world glut.
Early Monday, US crude had eased 35 cents to $29.09 a barrel, while Brent crude dipped 45 cents to $32.91.
Oil was aided in part by weakness in the US dollar as a steep drop in Treasury yields undermined the currency's interest rate differentials.
Against a basket of currencies, the dollar was up a shade at 96.120 having been at its lowest in almost four months.
Likewise, it edged up to 113.68 yen, having touched a 15-month trough just under 111.00 last week.
The euro was last at $1.1219, having slipped from a 3-1/2 month peak of $1.1377.
Gold eased off to $1,222.80 an ounce, after enjoying its best week in four years.