Portugal Colonial - Markets bounce as Middle East fears ease, US inflation in view

With Iran downplaying a reported Israeli attack on the country, which came days after a drone and missile strike on Israel by Tehran, tensions between the regional foes appeared to have cooled.

While the situation remains tense, the lack of escalation over the weekend provided traders with an opportunity to pick up equities and helped push oil down.

The gains came despite a largely negative lead from Wall Street, where the Nasdaq shed more than two percent owing to hefty selling in tech giants including Amazon, Apple and Netflix.

Investors are now setting their sights on the personal consumption expenditures (PCE) index, the Federal Reserve's preferred gauge of inflation, which is due on Friday.

The reading could play a major role in the central bank's decision-making on interest rates, and comes after a third successive month of above-forecast consumer price index figures.

The disappointing CPI data has dented hopes for a cut in June, and traders have scaled back their outlook for how many the Fed will make this year.

The PCE report is followed by the bank's policy announcement next week, which will be pored over for clues about its next step.

Several officials have lined up to temper expectations for cuts, citing sticky inflation as well as a still-strong economy and labour market.

Chicago Fed boss Austan Goolsbee said last week that the battle against surging prices had stalled.

"Right now, it makes sense to wait and get more clarity before moving," he said, warning that bringing inflation back to the bank's two percent goal would likely take longer than initially thought.

Hong Kong led gainers, jumping two percent, while Tokyo, Sydney, Seoul, Singapore, Mumbai, Manila, Bangkok and Wellington also rose.

There were small losses in Shanghai, Jakarta and Taipei, however.

London, Paris and Frankfurt all rose at the open.

Earnings from big-name firms including Google parent Alphabet, Tesla and Microsoft are also in play this week, with investors hoping for strong reports to back up a recent surge in equities.

- Key figures around 0715 GMT -

Tokyo - Nikkei 225: UP 1.0 percent at 37,438.61 (close)

Hong Kong - Hang Seng Index: UP 2.0 percent at 16,550.00

Shanghai - Composite: DOWN 0.7 percent at 3,044.60 (close)

London - FTSE 100: UP 1.0 percent at 7,972.63

Dollar/yen: UP at 154.67 at 154.64 yen on Friday

Euro/dollar: UP at $1.0664 from $1.0658

Pound/dollar: UP at $1.2380 from $1.2373

Euro/pound: UP at 86.14 pence from 86.11 pence

West Texas Intermediate: DOWN 1.4 percent at $81.05 per barrel

Brent North Sea Crude: DOWN 1.3 percent at $86.12 per barrel

New York - Dow: UP 0.6 percent at 37,986.40 (close)

S.Caetano--PC