Asian stocks edge higher on hopes of China stimulus

Asian stocks were up slightly in a cautious start to the week on Monday, with investors holding out hopes that China would take steps to stimulate the economy.

MSCI's broadest index of Asia-Pacific shares outside Japan tacked on 0.1% after rising to a 3-week high on Friday on the back of heightened speculation Beijing will launch new spending measures and reduced tensions in Ukraine.

Australian shares gained 0.5%, while Tokyo's Nikkei stock average rose 0.9%.

China's Premier Li Keqiang on Friday sought to reassure jittery global investors that Beijing was ready to support the cooling economy, saying the government had the necessary policies in place and would push ahead with infrastructure investment.

The euro lingered near a one-month low it hit against the dollar on Friday after an unexpected drop in Spanish and German inflation bolstered expectations the European Central Bank could further ease monetary policy as early as Thursday.

"It all depends on whether the ECB views the recent slowdown as a temporary pullback or a deeper problem. Given the abundance of policymakers talking about the possibility of negative rates, we believe they are growing more concerned about growth and inflation," Kathy Lien, managing director at BK Asset Management in New York, wrote in a note to clients.

The euro was already under pressure after suggestions of more ECB action last week from Germany - whose policymakers have in the past repeatedly voiced concerns about unorthodox monetary easing.

The focus now turns to euro zone inflation figures due later in the global session in light of Friday's weak Spanish and German inflation data.

The euro was little changed at $1.3746 after plumbing a one-month low of $1.3704 on Friday.

The dollar drew support from a rise in US Treasury yields amid hopes that the Federal Reserve will taper its massive monetary easing and pave the way for an eventual rate hike.

Yields of intermediate-dated Treasury notes neared two-month highs on Friday. The sustained pressure on yields follow comments from Federal Reserve Chair Janet Yellen earlier this month which raised the possibility of rate hikes starting as early as spring 2015.

The dollar inched up 0.1% to 102.87 yen, hovering below a two-week peak of 102.98 reached on Friday.

In the commodities markets, gold remained under pressure amid an improvement in risk appetite.

Spot gold traded at $1,295.91 an ounce, within a stone's throw of a six-week low of $1,285.34 hit on Friday.