MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.15% to 556.55

A rally in Japanese shares led stocks higher on Tuesday ahead of a slew of data this week, including U.S. inflation figures, which could clarify the Fed’s policy outlook after volatile markets last week.

Oil prices dropped following a 3% jump on Monday as investors were wary about the risk of a widening conflict in the Middle East that could hit global crude supplies.

Europe’s STOXX 600 index gained 0.3% as investors held back from making big bets ahead of U.S. producer prices later in the day.

Japan’s Nikkei climbed more than 3% after a holiday on Monday, after last week’s turbulence that began with a massive sell-off spurred by a rising yen and fears of a U.S. recession.

MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.15% to 556.55. Chinese stocks declined while Hong Kong’s Hang Seng Index rose 0.1%.

U.S. markets looked set to follow the cautiously optimistic tone, with S&P futures 0.47% higher and Nasdaq futures up 0.72%.

While aftershocks might reveal vulnerabilities, we continue to view recent volatility as being an equivalent of a ‘heart palpitation’ not a ‘cardiac arrest’, Viktor Shvets, head of global desk strategy at Macquarie Capital said in a note.

We also maintain that the nervousness about a U.S. slowdown is overdone, Shvets added.

The yen declined 0.42% to 147.855 per dollar on Tuesday, having hit a seven-month high of 141.675 on Monday last week.

The latest weekly data to August 6 showed that leveraged funds closed their positions in the yen at the quickest rate since March 2011.

Given the yen’s recent rally, dollar-yen is now more in sync with its yield differential, said Karsten Junius, chief economist at Bank J. Safra Sarasin.

Another wave of the yen-funded carry trade unwind will likely push the yen still somewhat higher towards year-end. Yet we don’t expect USD-JPY to decline meaningfully below 140, he added.