By Wayne Cole

Asian shares enjoyed a relief rally on Monday as record highs on Wall Street and policy easing in China helped calm some of the recent jitters on global growth, though plenty of potential pitfalls lay ahead this week.

In the United States, inflation data could provide a scare ahead of testimony by Federal Reserve Chair Jerome Powell on Wednesday and Thursday, where markets will be hyper-sensitive to any talk of early tapering.

The earnings season also kicks off with JP Morgan, Goldman, Citigroup and Wells Fargo among those reporting.

China releases figures this week on economic growth, trade, retail sales and industrial output amid concerns they could underwhelm given the sudden easing in policy last week.

"Expectations around China's outlook have soured over the past month as a result of some disappointing partial data made a lot worse by the optics of coming off peak growth from the pandemic recovery," said Westpac analysts in a note.

"However, annual growth is still expected to be above 8.0% and, through the second half of 2022, the quarterly growth pulse should firm back to trend."

For now, investors were happy that last week's burst of bearishness had swung around in New York, sending Wall Street higher and tempering the bull run in bonds.

On Monday, MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.7%, after shedding 2.3% last week.

Japan's Nikkei bounced 2.2%, and away from a two-month trough touched on Friday, while South Korea added 0.9%. Chinese blue chips rose 1.1%.

Nasdaq futures and S&P 500 futures were a fraction easier following their recovery on Friday. EUROSTOXX 50 futures held steady, while FTSE futures dipped 0.2%.

Yields on U.S. 10-year notes held at 1.35%, having been as low as 1.25% on Friday following eight straight sessions of price gains.

"The rally in U.S. rates in July has been remarkable," noted analysts at NatWest Markets. "No one driver perfectly explains the move ... but fears about global growth and the Covid Delta variant had raised new doubts on inflation."

That bout of risk aversion had also supported the safe haven U.S. dollar, until it ran into some profit taking on Friday. It was last at 92.190 on a basket of currencies, after touching a three-month top of 92.844 last week.

The safe haven yen also lost some ground to 110.16 per dollar, while the euro firmed to $1.1869 from last week's low at $1.1780.

European Central Bank President Christine Lagarde caught markets by surprise on Monday, saying the bank will change its guidance on policy at its next meeting and show it is serious about reviving inflation.

The ECB's new strategy allows it to tolerate inflation higher than its 2% goal when rates are near rock bottom.

The general risk-off mood helped gold higher last week and it was trading at $1,800 an ounce compared with its June trough of $1,749.

Oil prices steadied on Monday after ending a volatile week with a bounce as U.S. inventories tightened. Dealers are still uncertain about the outlook for supplies after OPEC talks on restrictions broke down.

Brent was last down 18 cents at $75.37 a barrel, while U.S. crude eased 16 cents to $74.40.