SINGAPORE (Dow Jones)--Japanese stocks on Monday posted their biggest percentage gain in more than three months as strong economic data from the U.S. and Europe on Friday reinforced investor confidence that an economic recovery is under way. "This is a new wave of optimism," said IG Markets institutional dealer Chris Weston. "There's no way this momentum on Wall Street will just turn around." Japan's Nikkei 225 Average climbed 3.4% to end at 10581.05, with automobile shares rebounding from Friday's weakness, while cyclical stocks such as commodity producers paced the advance on economic recovery hopes. Shares of Sumitomo Metal Mining rose 4.4% and Inpex climbed 5.4%. Stocks were bolstered following strong gains Friday on Wall Street after data showed that existing home sales in July increased at a better-than-expected pace and Federal Reserve Chairman Ben Bernanke said the economy was beginning to emerge from its worst crisis in generations. Data released separately also showed the euro zone's preliminary Markit composite purchasing managers' index rose to a 15-month high. Dow Jones Industrial Average futures were recently 35 points higher in screen trade. "It seems from the rising (U.S. bond market) yields that the overall funds flow is from the bond markets to the stock markets," said Castor Pang, strategist at Sun Hung Kai Financial. Australia's S&P/ASX 200 jumped 3.2%, rebounding from losses Friday and then some, New Zealand's NZX 50 gained 1.1%, South Korea's Kospi advanced 2.0% to end at a 13-month high, Hong Kong's Hang Seng Index added 1.7%, China's Shanghai Composite rose 1.1%, Taiwan's Taiex gained 2.8%, and Singapore's Straits Times rose 2.7%. India's Sensex climbed 2.2% in afternoon trading. The Philippines' main share index jumped 5.1% for its best performance in percentage terms since January, playing catch-up after Friday's holiday. Earlier in the day, the Asian Development Bank approved a $500 million loan to the nation to help it bridge its growing budget deficit, according to reports. Malaysia's main index was up 0.9% and Indonesian shares added 1.8%, while Thailand's SET Index climbed 1.3%. In Manila, shares of Philippine Long Distance Telephone rose 4.8% and Metropolitan Bank & Trust jumped 6.8%, while San Miguel added 1.6%. In Bangkok, Bank of Ayudhya and Bangkok Bank gained 2.2% each and Thai Airways International rose 2.4%. Resource stocks rallied across the region, with BHP Billiton jumping 4.3% and Rio Tinto climbing 4.7% in Sydney, Korea Zinc advancing 5.2%, Cnooc climbing 3.5% in Hong Kong and Hindalco Industries rising 4.0% in Mumbai trading. In Tokyo, Toyota Motor added 2.3% and Honda Motor gained 3.2% after Goldman Sachs said its coverage view on Japanese auto makers remained attractive in spite of the end of the U.S. government's "cash for clunkers" incentive program later Monday. A weakened yen also helped most exporters. Shares of convenience store operator Lawson rose 2% and drugstore chain Matsumotokiyoshi Holdings added 0.2% after the two agreed to a broad alliance, including for the sale of over-the-counter medicines. Chinese shares in Shanghai advanced after last week's roller-coaster ride amid concerns Beijing might fine-tune policies to prevent bank loans being used for stock market purchases and tighten banks' capital requirements. "Our take on increased oversight and tightening of regulations is that it should be cheered and not feared," Patrick Bennett, Asia forex and rates strategist at Societe Generale wrote in a report. "Certainly the massive expansion of bank lending will have some 'leakage' associated with it. But the idea that the bulk or a significant proportion of funds have been misdirected or associated with speculation rather than economic activity is not borne out by the hard data," he added. Shares of Alibaba.com jumped 10.5% in Hong Kong, after its parent group announced a restructuring of its China Yahoo business in a move that may stoke a growing rift between the company and its single-largest shareholder, Yahoo. Alibaba said last week that it would separate Koubei.com, a classified-listings web site, from China Yahoo and transfer the unit to its retail web site, Taobao.com. Shares of China Petroleum & Chemical rose 0.7% in Hong Kong and 2.2% in Hong Kong after the refining giant Sunday said its first-half profits more than quadrupled. In foreign exchange markets the yen was weaker against the U.S. dollar and euro as rising equities spurred selling of the safe-haven unit. The U.S. dollar was at 94.84 yen, from 94.36 yen in New York Friday, with the euro at 135.60 yen from 135.21 yen. The euro was also buying $1.4296. Some analysts doubted the euro would rise much further from here. "The real question on everyone's lips is whether the global outlook and the European backdrop is strong enough to warrant the high level for the currency. Yes, the world looks better than it did last week, but is it strong enough to see currencies break into new ranges?" asked Bank of NZ strategist Danica Hampton. Base metals on the Shanghai Futures Exchange soared Monday, tracking their London Metal Exchange counterparts' rally Friday and in Asian hours earlier in the day, due to a weakness in the dollar and higher-than-expected U.S. home sales data. The benchmark December copper contract settled 5% higher at CNY49,230 a metric ton, after remaining at that upper limit for most of the trading session. Spot gold was steady after rallying to a one-week high Friday. The yellow metal was at $953.00 per troy ounce, down 70 cents from the New York close.

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