Hong Kong: Asian stocks edged higher on Monday as the Chinese premier’s positive assessment of the world’s third largest economy helped soothe nerves ahead of key earnings reports from leading US companies. European markets, on the other hand, opened lower.

Many Asian markets seesawed before heading modestly higher, led by Hong Kong and Shanghai stocks after Chinese Premier Wen Jiabao said on Saturday that the economy was faring “better than expected" as a massive stimulus package produces results.

Positive changes: Chinese Premier Wen Jiabao. Many Asian markets seesawed before heading modestly higher after Jiabao said the economy was faring ‘better than expected’ as the stimulus package produces results. Nelson Ching / Bloomberg

Investors were also awaiting results that could test a growing belief that the world economy and banking system have turned a corner.

Among the hundreds of US companies due to report earnings are Bank of America Corp., Coca-Cola Co., Microsoft Corp., International Business Machines Corp. and McDonald’s Corp.

So far, rosier-than-expected earnings from financial giants such as Citigroup Inc. and Goldman Sachs have buoyed optimism of a recovery and given further impetus to a six-week rally.

Still, with a number of markets already up nearly 20% in less than two months, many are becoming wary of another bubble in the making and say any negative surprises could cause a bout of selling.

“Equities markets are beginning to be quite detached from the underlying economic fundamentals—once again," said Kirby Daley, senior strategist at Newedge Group in Hong Kong. “The worst is far from over."

As trading got under way in Europe, Britain’s FTSE 100 lost 0.6%, Germany’s DAX retreated 2% and France’s CAC-40 was off 1.7%.

The euro fell against the dollar to its lowest point since mid-March as traders anticipated another interest rate cut from the European Central Bank.

US futures pointed to a lower open on Wall Street on Monday. Dow futures fell 79 points, or 1%, to 8,005, and S&P 500 futures slipped 10.3 points, or 1.2%, to 856.5.

Earlier in Asia, Japan’s Nikkei 225 stock average recouped morning losses to rise 17.17 points, or 0.2%, to 8,924.75 points, while South Korea also made up lost ground, rising 0.6% to 1,336.39 points.

Taiwan’s market was higher, though markets in Australia and Singapore retreated.

In China, Shanghai’s key index added 2.1% to 2,557.46 points while Hong Kong’s Hang Seng climbed 1% to 15,750.91 points.

Wen said the economy appeared to be bouncing back, with industrial output, consumer spending and factory investment on the rise.

“China’s package plan is already paying off and positive changes have taken place in the economy," he said on Saturday at a forum in China. “The situation is better than expected."

Mainland investors were also encouraged after a Chinese regulator said bank lending this year would not be limited to the 5 trillion yuan (Rs37 trillion) the government has cited as a goal. A flood of liquidity in the market has been pushing up stocks since the start of the year.

Chinese airlines were among the day’s best performers, after tickets prices were raised on Monday following reports of heavy 2008 losses for state-owned carriers.

Air China Ltd shares soared 8.6% in mainland trade, while those of China Eastern Airlines jumped 16.9% in Hong Kong.

In Japan, steel makers strengthened after analysts issued upbeat appraisals of the sector and said producers may see lower price cuts from auto makers.

Nippon Steel Corp., the country’s leading producer, advanced 4.3%.

Gains in Japan’s broader market were capped by losses by several companies, including Toshiba Corp. The giant chip maker—which projected a wider-than-expected fiscal year loss, warned of contract job cuts and may need to raise fresh capital—dropped 4.8%.

On Friday in New York, stocks closed marginally higher as earnings from Citigroup and General Electric Co. surpassed the market’s expectations.

The Dow Jones Industrial Average rose 5.9 points, or 0.1%, to 8,131.33. The Standard and Poor’s 500 index added 4.3 points, or 0.5%, to 869.6 points.

In oil, benchmark crude for May delivery fell $1.76 (Rs88) to $48.57 a barrel in Asian trade. The contract on Friday rose 35 cents to settle at $50.33.

In currencies, the dollar eased to 98.85 yen (Rs50.41) from 99.13 yen, while the euro weakened to $1.29 from $1.30.

Bonnie Cao in Beijing and Tomoko A. Hosaka in Tokyo contributed to this story.