Risk appetite seems to have returned to the markets after a stress test on European banks revealed that none of them is faced with any stability threat while upbeat US earnings and last week's eurozone data added to the sentiment.

The MSCI Asia Pacific Index was up 0.35% at 6:25 GMT, capping last week's 2.9% rally, after US corporate results surprised on the higher side and eurozone manufacturing PMI unexpectedly stayed above 50, showing continued expansion in October.

The stress test conducted by the European Central Bank over the weekend showed that none of the systemically important banks of the region is faced with any stability threat.

At the same time, less important banks will have sufficient time to address their challenges, the ECB said.

The US dollar index, a gauge that measures the strength of the greenback against a basket of majors on a trade-weighted basis, has edged lower to 85.46 from 85.71.

The EUR/USD has risen to 1.2715 from 1.2670 and the GBP/USD moved up to 1.6110 from 1.6089. The USD/JPY has dropped from a two-week high of 108.16 to 107.85.

Markit Economics said on 23 October that the eurozone index for October rose to 50.7 from 50.3 beating analysts' estimate of 49.9. The services and composite indices too surprised on the higher side with expansion territory readings.

Gold and Oil

Gold seems stuck to the sideways track around $1,230 in the spot market since last Thursday. It had lost momentum on 21 October after hitting a 41-day high of $1,255.

Brent crude for immediate delivery also remains stuck in a very narrow range of around $86, not far from the four-year low of $82.90 touched last week.

Nothing major is due on the economic calendar for Monday, especially from the eurozone but US pending home sales data for September will be watched, more so after new home sales growth eased sharply to 0.2% from 15.3% in the month.