European shares edged lower following a strong session in Asia on Monday, after USA stocks surged in the previous session on fresh signs of economic strength and the Federal Reserve said it would be flexible with its interest-rate policy.
The greenback, meanwhile, is on the decline against most currencies, falling to a more than two-month low on Monday on signs the Federal Reserve may pause interest-rate increases.
Risk appetites were strong in Asian trade, thanks to China's aggressive monetary easing on Friday to address a sharp economic slowdown and to hopes that Washington and Beijing can strike a comprehensive trade deal.
The Australian dollar, whose fortunes are closely correlated with China, gained half a percent to $0.7140.
Felix Lam, a portfolio manager at BNP Paribas Asset Management, said policy makers in the world's two largest economies had helped lift market sentiment, but the key question mark was whether the two countries could reach a trade deal.
He warned, however, that there is continued uncertainty about global growth, trade talks between the United States and China and US monetary policy.
The gains extended Friday's rise following robust USA employment data and a message from the Federal Reserve that it would be patient and flexible in policy decisions this year. The boost to stock markets saw them recapture all the year's losses and push into positive territory for 2019 so far, with Wall St's main indices closing up more than 3 percent by the close on Friday.
"The market is reconsidering its expectations for Fed rate hikes and as the expectations have been scaled back gold prices have been able to edge higher", said Suki Cooper, precious metals analyst at Standard Chartered Bank.
"Last Friday's strong United States jobs data suggested that recession fears were overblown", said Philip Wee, currency strategist at DBS in a note.
Global foreign exchange market embraced the first day of the week with bumpy trading as fewer interest rate hikes later would lead to more hot money flowing in the market.
Wee said he still expects the Fed to hike rates twice this year. The dollar index, that is used to measure the American currency against six other major currencies, was trading 0.18 percent lower than the previous close at 96.01. The move frees up $116 billion for new lending as it tries to reduce the risk of a pronounced fall in the pace of economic growth.
China's move to make it easier for banks to lend also provided support to equities, while investors keep an eye on Beijing as negotiators begin talks to end a trade war between the world's top two economies.
USA gold futures gained 0.3 percent to $1,289.40 per ounce. The currency has now advanced nearly 1 per cent since mid-December. South Korea's Kospi climbed 1.3%, Australia's S&P/ASX 200 benchmark rose 1.1% and Hong Kong's Hang Seng Index rose 0.8%.
Shanghai blue chips rose 0.3 percent, having already climbed over 2 percent on Friday.