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Asian stocks made gains on Monday, with a fresh rally seen in Hong Kong even after China reaffirmed its commitment to its economically painful zero-Covid policy.
Global markets and oil prices were buoyant last week on hopes that Beijing may begin to roll back policies aimed at stamping out the disease within its borders.
But on Saturday, the Chinese government said it would "unswervingly" stick to its current plan, which involves harsh lockdowns, and strict quarantine and testing regimens for even the smallest clusters of cases.
Despite the official stance, "there are still hopes in the market" that Beijing may relax Covid-19 restrictions in the coming months, Iris Pang, chief economist for Greater China at ING Wholesale Banking, told AFP.
"Traders believe that the Chinese government cannot permanently hold these existing Covid measures, and therefore the only direction is... looser Covid measures," she said.
Ongoing large-scale events, such as the China International Import Expo in Shanghai, are also seen by investors as "a kind of water-testing" by Beijing, to see if cases and deaths rise significantly, Pang added.
On Friday, Wall Street equities ended a volatile session higher after the latest US jobs data showed that hiring remained resilient and wages continued to rise, though at a slower pace.
The data, released days ahead of critical US midterm elections, raised hopes of a soft landing for the world's biggest economy despite aggressive Fed rate hikes aimed at taming inflation.
- Vaccine 'game-changer' -
All three main US indexes ended around 1.3 percent higher on Friday, and Tokyo shares extended those gains, with the benchmark Nikkei index ending 1.2 percent higher on Monday.
Hong Kong shares dipped slightly at the open, then rocketed 2.7 percent at the close, adding to a jump of more than five percent in the previous session.
Bourses in Shanghai and Shenzhen edged up 0.2 percent and 0.4 percent respectively. However, as European trading began, London lost 0.2 percent and Paris fell 0.7 percent.
China is the last major economy wedded to a strategy of extinguishing Covid-19 outbreaks as they emerge, despite the widespread disruption to businesses and international supply chains.
"Last week, the financial market was stirring on rumours of China reopening," Raymond Yeung and Zhaopeng Xing of ANZ Research said in a note.
"Obviously, China feels the urgency to normalise the economy... But the political leadership will not adopt 'living with Covid'," the pair said.
"In our view, the availability of locally developed new vaccines will be a game-changer".
Seoul closed up by 1.0 percent, Taipei rose 1.5 percent and Sydney ended up 0.6 percent. Jakarta added 0.8 percent and Singapore inched up 0.1 percent.
Dashed hopes of a Chinese reopening also drove down oil prices, which had rallied on Friday on the optimism that Beijing could soon change course, pushing up demand for crude.
- Key figures around 0400 GMT -
Tokyo - Nikkei 225: UP 2.7 percent at 27,527.64 (close)
Hong Kong - Hang Seng Index: UP 2.9 percent at 16,595.91 (close)
Shanghai - Composite: UP 0.2 percent at 3,077.82 (close)
London - FTSE 100: DOWN 0.2 percent at 7,318.61
Pound/dollar: UP at $1.1365 from $1.1309
Euro/dollar: DOWN at $0.9930 from $0.9964
Dollar/yen: DOWN at 147.13 from 147.44 yen
Euro/pound: DOWN at 87.62 pence from 87.80 pence
West Texas Intermediate: DOWN 1.3 percent at $91.42 per barrel
Brent North Sea crude: DOWN 1.0 percent at $97.57 per barrel
New York - Dow: UP 1.3 percent at 32,403.22 (close)
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