Global stock markets clawed back losses Monday as spiraling tensions over North Korea showed tentative signs of easing, in turn reducing appetite for safer assets.

Fears of a catastrophic confrontation between Washington and Pyongyang were calmed when CIA Director Mike Pompeo said Sunday that there was "nothing imminent" in the escalating standoff.

Investors welcomed the change in tone from last week, when President Donald Trump threatened "fire and fury" if North Korea continued to push for nuclear technology.

London's benchmark FTSE 100 index climbed 0.6 percent, while in the eurozone Paris and Frankfurt added more than one percent.

US stocks were also solidly higher, with the S&P 500 advancing 1.0 percent.

"The sell-off was triggered mostly by the heated rhetoric over North Korea. The president used some language that shocked many investors," said Alan Skrainka, chief investment officer of Cornerstone Wealth Management.

"It was an immediate reaction from investors to concerns that a military action was possible and now people are taking the issue more in stride."

Earlier in Asia, Hong Kong was back in positive territory after slumping two percent Friday, while Shanghai ended the day higher despite data showing that Chinese industrial production slowed sharply in July as government efforts to rein in debt weighed on demand.

However, Tokyo closed down one percent as traders returned from a three-day holiday weekend to play catchup after Asian and European shares had dropped Friday, with the Nikkei finishing at its lowest level in more than three months.

Investors largely shrugged off official data showing that Japan's economy grew by a faster-than-expected one percent in the three months to June, as the world's third-largest economy marked its longest expansion in more than a decade.

- 'Not out of the woods' -

"What we are seeing today is relief at the (geopolitical) situation not deteriorating over the weekend, something traders were clearly wary of toward the end of last week," said Oanda analyst Craig Erlam.

As stock markets started recovering, the dollar rose against the Japanese currency and the euro, while gold halted its advance after jumping 2.4 percent last week.

"We're seeing a small unwinding of... risk aversion trades, with gold trading slightly lower and the yen and Swiss franc off against the dollar, pound and euro," Erlam added.

But analysts cautioned that with joint South Korean–US military exercises scheduled and North Korea celebrating "Liberation Day" Tuesday, market volatility could return.

"We are not out of the woods yet and the situation in North Korea will remain front and centre," said Chris Weston, chief market strategist at IG Markets.

Among other markets, oil prices retreated on worries about Chinese oil demand.

- Key figures around 2030 GMT -

New York - Dow: UP 0.6 percent at 21,993.71 (close)

New York - S&P 500: UP 1.0 percent at 2,465.84 (close)

New York - Nasdaq: UP 1.3 percent at 6,340.23 (close)

London - FTSE 100: UP 0.6 percent at 7,353.89 (close)

Frankfurt - DAX 30: UP 1.3 percent at 12,165.12 (close)

Paris - CAC 40: UP 1.2 percent at 5,121.67 (close)

EURO STOXX 50: UP 1.3 percent at 3,450.66

Tokyo - Nikkei 225: DOWN 1.0 percent at 19,537.10 (close)

Hong Kong - Hang Seng: UP 1.4 percent at 27,250.23 (close)

Shanghai - Composite: UP 0.9 percent at 3,237.36 (close)

Euro/dollar: DOWN at $1.1786 from $1.1824

Pound/dollar: DOWN at $1.2967 from $1.3015

Dollar/yen: UP at 109.67 yen from 109.11 yen

Oil - Brent North Sea: DOWN $1.37 at $50.73 per barrel

Oil - West Texas Intermediate: DOWN $1.23 at $47.59 per barrel

source: AFP