Asian stocks inched higher on Monday, with investors taking profits on defensive plays and buying back other beaten down shares, though selling could resume shortly as the US and Chinese economies are slowing in tandem.
Financial bookmakers expected major European stock markets to open slightly lower, with slowing economic growth likely to cause profit expectations to come down.
The US labour market shrank in June for the first time this year, adding to fears of a sharp global slowdown in the second half, especially with Chinese manufacturing activity shifting down and property prices at risk of falling.
"Double-dip fears are the pervading influence on market psychology at present even as European sovereign concerns appear to be easing," said Mitul Kotecha, global head of foreign exchange strategy at Credit Agricole CIB in Hong Kong.
Financial markets reflect a big decrease in risk taking as a result of perceptions of the global economy. World stocks have fallen 13.1 per cent in the last two months, the Australian dollar slid 8.7 per cent and emerging market bond yields have risen around 75 basis points over U.S. Treasuries.
This week the focus will be squarely on how central banks will address signs of a coming global slowdown, with the European Central Bank and the Bank of England both holding policy meetings and the Reserve Bank of Australia and Bank of Korea meeting as well.
Meanwhile investors are being bombarded by talk of a double dip recession. The number of news articles with the phrase "double dip" trebled in June, Factiva showed.
Japan's Nikkei share average rose 0.7 percent, though remained within spitting distance of a seven-month low hit last Thursday.
After it fell 5.5 per cent last week, some short-term indicators pointed to oversold conditions, but incoming economic reports could dictate where the market heads next.
"We're seeing a bit of short-covering now that we're past the jobs data, but the market is going to want to see a lot of the other indicators coming up this week, including those linked to consumer spending," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo.
The MSCI index of Asia Pacific shares outside Japan rose 0.1 per cent, with gains in resources and technology shares mostly offset by declines in consumer staples, financials and telecom stocks.
In the last two months, telecom and utility stocks - two sectors resilient to changes in business cycles - have fared the best. Commodity-related shares and technology were the poorest performing.
Mainland Chinese stocks were Asia's biggest decliners. The Shanghai composite was down 0.7 per cent, bringing year-to-date losses to 27 per cent.
China's fourth-largest lender Bank of China saw its shares slip 0.9 per cent, the biggest drag on the composite index, after the firm raised $US8.8 billion in a rights issue over the weekend.
The company's shares were down 1.8 per cent in Hong Kong helping drive the Hang Seng index down 0.2 per cent.
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