Asian shares rebounded today as investors bought beaten-down stocks while expectations of higher US interest rates kept the dollar firm.
Oil prices have fallen to around $70 a barrel after news that al-Qaeda's leader in Iraq, Abu Musab al-Zarqawi, had been killed in a US air raid, raising hopes for improved security and oil exports from Iraq.
Cheaper oil supported equities, but further gains were seen capped by concerns about rising global interest rates and worries about US inflation.
European markets followed the firm Asian tone. London's FTSE 100, Germany's DAX and France's CAC all traded more than 1 per cent higher in early trading.
In Tokyo, the Nikkei ended up 0.8 per cent at 14,750.84, while the broader TOPIX index rose 1.1 per cent to 1,498.68.
Global markets have been buffeted in recent weeks by worries of growing inflationary pressures in the United States, and Asian markets have been further hit by fears that foreign investors would pull money out of higher-risk emerging-market assets.
The dollar hovered near a one-month high against the euro, a day after rallying on indications the European Central Bank (ECB) would be modest in raising interest rates following its latest rise.
The ECB raised interest rates a quarter-percentage point to a three-year high of 2.75 per cent yesterday, disappointing some expectations for a rise of 50 basis points.
But the ECB's latest rate rise underlined fears that global interest rates were on the rise. India and South Korea were among countries that also raised rates on Thursday.
Gains against the euro boosted the dollar versus the yen, pushing the US currency to a six-week high.