World stocks rallied Monday, led by a jump in Japan's main index, amid hopes for more stimulus from central banks in Europe and Japan.
With Wall Street closed for Presidents Day, Japan's benchmark Nikkei 225 soared 7.2% to close at 16,022.58, rebounding from last week's slump to post its second biggest one-day gain in three years.
That led to big gains in Europe, where Britain's FTSE 100 closed 2% higher at 5,824.28 and Germany's DAX gained 2.7% to 9,206.84. France's CAC 40 rose 3% to close at 4,115.25.
Stocks began rallying after government data showed Japan's economy shrank 1.4% on an annualized basis last quarter because of weak consumer demand and slower exports. It's a setback for Prime Minister Shinzo Abe's economic revival program, which aims to stoke inflation through massive monetary easing. However, the report also gives the government more reason to open the stimulus taps wider to restore growth, economists said.
"Together with the recent slump in the Nikkei and the appreciation of the yen, the case for additional easing remains compelling," said Marcel Thieliant of Capital Economics. He predicted the Bank of Japan will step up bond purchases and push interest rates that are already in negative territory even lower.
Investor sentiment was also bolstered by comments from China's central bank chief playing down the likelihood of a one-off devaluation of the yuan.
People's Bank of China Governor Zhou Xiaochuan signaled in a Caixin magazine interview published over the weekend that there was no basis for further depreciation of China's currency, providing relief for the country's exporting neighbors worried that a weakening yuan would hurt their competitiveness.
Later in the day, stocks were nudged higher and the euro fell sharply after the European Central Bank reiterated that more stimulus would be considered at the next policy meeting in March.
The euro was down 1% at $1.1138 after ECB chief Mario Draghi said Monday there were "a variety of instruments" the ECB could employ if it decided more stimulus is needed. It could pump more money into the economy or cut rates further, something that would weigh on the value of the euro.
U.S. futures, meanwhile, rose. Dow futures were up 1.2% and those for the S&P 500 were up 1.3%.
Elsewhere, South Korea's Kospi climbed 1.5% to 1,862.20 and Hong Kong's Hang Seng was up 3.3% to 18,918.14. Australia's S&P/ASX 200 rose 1.6% to 4,843.50. Taiwan's benchmark was flat while markets in Southeast Asia gained.
The Shanghai Composite Index in mainland China, though, lost 0.6% to finish at 2,746.20 after reopening following the Lunar New Year holiday.
Chinese shares were also weighed down by the latest monthly trade figures. Exports fell 11% while imports slid by nearly a fifth, according to customs data, highlighting persistent weakness in the world's second biggest economy.
Economists, however, were reserving final analysis until figures for February are out because the timing of the Lunar New Year holiday distorts China's economic data at the beginning of the year.
In energy trading, benchmark U.S. crude oil futures rose 29 cents to $29.73 a barrel in electronic trading on the New York Mercantile Exchange. The contract climbed $3.23 on Friday. Brent crude, a benchmark for international oils, gained 5 cents to $34.04 a barrel in London.