Most Asia markets rose Monday as investors built on last week's rally, with another healthy lead from Wall Street providing support, but oil prices retreated from their three-and-a-half-year highs.

Malaysia's ringgit recovered from an early sell-off to sit flat while stocks were up more than one percent in Kuala Lumpur as trading resumed after last week's general election that saw a shock win for 92-year-old former premier Mahathir Mohamad.

While analysts had expected a sharp drop in equities, they said Mahathir had soothed many concerns by giving key posts to people seen as market-friendly.

“We have turned mildly positive over the short term,” Danny Wong, chief executive officer at Areca Capital, told Bloomberg News.

“Most of the local funds have turned slightly positive with more clarity from Mahathir after he announced the 10 key ministries plus an elder council. Confidence is returning.”

Investors will be keeping a close eye on China-US trade talks this week, with President Xi Jinping's top economics official and Vice Premier Liu He visiting Washington after a high-level meeting in Beijing earlier in May ended without any agreement.

Hopes that the two sides can avert a trade war were boosted Sunday when Donald Trump said he was working with Xi to prevent telecom giant ZTE from going out of business after it was hit by a US technology sales ban.

The US leader tweeted that he had asked officials to come up with a rescue plan, saying too many jobs were at risk, seeming to offer an olive branch.

Oil prices retreat

Hong Kong led gains in Asia Monday, surging 1.4 percent, while Shanghai added 0.3 percent.

Tokyo ended up 0.5 percent, with Fujifilm climbing 1.6 percent after US photocopier and printer maker Xerox pulled out of a $6.1-billion merger deal. Analysts said the move was welcomed by traders who thought the deal was not good for Fujifilm.

Sydney added 0.3 percent and Wellington gained 0.4 percent while Taipei piled on 0.9 percent.

However, Seoul and Singapore were slightly down.

Oil extended Friday's losses, after last week reaching highs not seen since November 2014 in response to Trump's decision to pull out of the Iran nuclear deal.

A pick-up in demand, economic uncertainty in major producer Venezuela and the ongoing output cap by OPEC and Russia are keeping the commodity buoyant.

However, Stephen Innes, head of Asia-Pacific trading at OANDA, warned: “The one possible concern is the developing indications that point (to) Saudi Arabia alleviating the effect of the sanctions by increasing output to counter the Iran disruption.

“That also raises the specter that other OPEC countries will follow suit, which could put the current… supply deal in jeopardy.”

On currency markets, the dollar was mixed against its main peers but with US interest rates expected to rise at least twice more this year, analysts are tipping it to strengthen further.

“Given the dovish display by other central banks, the lonely Federal Reserve board appears to be the last man standing as speculation about interest rate rises and policy normalization in the Eurozone, Japan and Britain gets kicked down the road,” Innes said.

In early European trade, London was flat, Paris fell 0.2 percent and Frankfurt rose 0.1 percent.

Key figures

Tokyo – Nikkei 225: UP 0.5 percent at 22,865.86 (close)

Hong Kong – Hang Seng: UP 1.4 percent at 31,541.08 (close)

Shanghai – Composite: UP 0.3 percent at 3,174.03 (close)

London – FTSE 100: FLAT at 7,724.93

Euro/dollar: UP at $1.1960 from $1.1943 at 2100 GMT on Friday

Pound/dollar: UP at $1.3560 from $1.3542

Dollar/yen: UP at 109.35 yen from 109.29 yen

Oil – West Texas Intermediate: DOWN 22 cents at $70.48 per barrel

Oil – Brent North Sea: DOWN 34 cents at $76.78 per barrel

New York – Dow: UP 0.4 percent at 24,831.17 (close) – APP