Asian stocks on Monday were close to wiping out all their losses since China's shock currency devaluation in August, as global equities rallied after the Chinese central bank cut rates to shore up faltering growth.

Asian stocks on Monday were close to wiping out all their losses since China's shock currency devaluation in August, as global equities rallied after the Chinese central bank cut rates to shore up faltering growth in the world's second-largest economy.

Japan's Nikkei rose 1.0 per cent to a two-month high while South Korea's Kospi gained 0.4 per cent and the Australian shares edged up 0.3 per cent.

MSCI's dollar-denominated index of Asia-Pacific shares outside Japan dipped 0.1 per cent due to the dollar's strength but stood near 2-1/2-month highs touched on Friday.

The MSCI's index of the world's share markets shot up to its highest level in more than two months on Friday, having risen more than 10 per cent from its two-year low hit less than a month ago.

It has recovered most of the losses since Aug. 11, when China's sudden devaluation of the yuan sparked worries its economy may be in deeper trouble than many had thought.

On Wall Street, S&P 500 Index rose 1.1 per cent to turn positive on the year, while the tech-heavy Nasdaq jumped 2.3 per cent.

Technology shares led the way, thanks to gains in Alphabet , Amazon and Microsoft, after the three companies reported earnings results. The former two hit record highs, while Microsoft rose to a 15-year high.

China had set the tone late on Friday when its central bank cut the benchmark one-year lending rate by 25 basis points to 4.35 per cent and lowered big banks' reserve requirement ratio by 50 basis points to 17.5 per cent.

The surprise move lifted risk assets that had been already boosted by Thursday's message from European Central Bank chief Mario Draghi that the central bank stood ready to enhance quantitative easing and cut interest rates into even deeper negative levels.

That saw the Italian and Spanish two-year government bond yields both turn negative for the first time, meaning investors effectively pay to hold them rather than get paid.

The benchmark German two-year yield fell further to minus 0.345 per cent.

As negative yields undermine the attraction of holding the euro, traders pushed it to a 2 1/2-month low of $1.0989.

The yen dipped to 121.60 to the dollar, its lowest since late August as traders speculated the Bank of Japan might unleash additional easing on Friday, following the lead from the ECB and China.

"Japanese economy is weaker than in August and there's no sign of a rebound. Markets are now expecting easing from the BOJ," said Takeru Ogihara, chief strategist at Mizuho Trust Bank.

The offshore yuan traded at 6.3908 to the dollar, near one-month low of 6.3990 hit on Friday after China's rate cut.

Markets are looking to Chinese Communist party's central committee meeting from Monday to Thursday to set out a five-year plan.

Ahead of the meeting, Premier Li Keqiang said that China has never stated the economy must grow seven per cent this year, coinciding with remarks by a top central bank official on Saturday that China would be able to keep annual economic growth at around 6-7 per cent over that period.

Oil prices fell, however, still pressured by concerns of over-supplies.

Brent futures stood at $44.62, little changed so far this week after having fallen 5.6 per cent last week. – Reuters