European shares climbed to a fresh five-year high yesterday as Asian equity markets quickly recovered from jitters after North Korea’s nuclear test, while oil held above $60 on expectations of an Opec production cut.

The dollar was firm, hitting its highest level against the yen this year and a near three-month peak against the euro on the belief that U.S. interest rates will remain high for some time yet, which also kept government bonds under pressure.

Investor appetite for riskier assets like stocks has so far held up on expectations that a still strong global economy will protect healthy corporate profits. Plentiful merger and acquisition activity is also lending support.

Gains were broad-based, with mobile phone giant Vodafone up on hopes shareholders will see increased cash returns, while Airbus parent EADS rose more than 3 percent after appointing a new chief executive for its troubled plane maker unit.

Japan’s Nikkei average returned from a three-day holiday weekend to gain 0.25 percent to a five-month high of 16,477.3 points after technology stocks such as Tokyo Electron Ltd followed U.S. counterparts higher.Shares in Seoul gained almost 0.7 percent.

U.S. technology stocks rose on Monday in anticipation of Google’s deal to buy online video service YouTube.

Recent economic data, however, has suggested markets were too aggressive in discounting a U.S. slowdown, with revisions to U.S. non-farm payrolls numbers on Friday showing the labour market in better shape than previous assessments.

The dollar has benefited as bond market investors have pushed back their expectations of when the U.S. Federal Reserve might start cutting interest rates. The dollar hit a 2006 high of 199.51 yen, rose to a five-month high against the Swiss franc and pushed the euro to $1.2556, its lowest since mid-July.

The yen was not helped by data showing slower than expected growth in core Japanese machinery orders.

Government bonds were under pressure on the U.S. rate view and expectations that euro zone rates are likely to continue rising.