Asian Stocks Gain; Nikkei Closes Up 1.6%

Updated from 3:01 a.m. EDT

By Stephen Wright

BANGKOK -- Asian stock markets advanced Monday as an expansion in Chinese manufacturing added to hopes the global economy is slowly clawing its way out of recession.

Commodities stocks led the region's gains as oil topped $67 a barrel and two surveys of Chinese companies showed manufacturing gained in May, albeit weakly.

But this sliver of hope from the world's third-biggest economy provided reason enough for markets to build on the massive gains logged since early March on optimism that the global economy is recovering from a severe slowdown.

It also added to Friday's encouraging nuggets -- Japan's industrial production jumping in April and India's slowdown leveling out in the first quarter -- giving investors enough confidence to shrug off the imminent bankruptcy filing of U.S. automaker General Motors(GM Quote), expected later Monday.

It would be the largest industrial bankruptcy in American history and could potentially dent a recovery in U.S. consumer confidence that is crucial to reviving global growth. In an unprecedented move, Washington will pump $30 billion more into GM as it makes its way through bankruptcy court and develops a restructuring plan, officials of President Barack Obama's administration said late Sunday.

Any signs of deterioration in the U.S. economy, the world's largest, could send stocks markets into a tailspin, particularly since the recent gains of 30% or more may be based on a too sanguine view of the prospects for recovery.

"At current levels the upside is limited and the downside risk is quite high. If there is any negative news from data in the U.S. a correction can be expected," said Peter Lai, an investment manager at DBS Vickers in Hong Kong.