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Japan's benchmark Nikkei average .N225 climbed 1 percent and the broader Topix index .TOPX rose 1.2 percent, while Australian shares .AXJ0 also gained.

Buffett, chairman of Berkshire Hathaway Inc (BRKa.N), told shareholders in his widely read annual letter that he saw the need for "major acquisitions," a sign stocks may be cheap.

In many parts of Asia, inflation and measures to combat it continue to dominate policymaking. Inflation is seen as one of greatest risks to the economic growth that has encouraged investment in Asian emerging markets, as much of Europe and other developed economies stagnate.

Chinese manufacturing growth slowed in February, according to an official survey, as the government's sustained campaign to tame inflation weighed on industrial activity.

High global commodity prices complicated the task of monetary tightening, pushing a gauge of industrial input prices to a three-month high in China's official purchasing managers' index (PMI).

The overall PMI, which is designed to provide a snapshot of conditions in the manufacturing sector, fell to 52.2 in February from 52.9 in January, the China Federation of Logistics and Purchasing said.

"Inflation pressures are rising but economic activity is slowing. Slower economic growth is good for cooling inflation," said Wang Hu, economist at Guotai Junan Securities in Shanghai.

China's battle with inflation is a key market factor, and some foreign investors may favor Japanese stocks, analysts said.

"U.S. and European investors have been the main players in the Japanese market. But Asian investors have joined in as Japan is one of the few countries with a low risk of rate hikes," said Shun Maruyama, chief strategist at Credit Suisse.

"They are buying Japanese stocks on a process of elimination as Japan has more tolerance for higher oil prices than other Asian countries."

Australia's central bank kept interest rates steady on Tuesday for a fourth month, and said inflation looked set to remain within its preferred range all year, indicating it would not rush to raise them again.

In Indonesia, annual inflation slowed in February but at 6.84 percent stayed above the central bank's target range of 4-6 percent.

Crude oil traded close to $120 per barrel last week, its highest in more than two years, largely on fears that political upheaval in Libya would spread across oil-producing nations in the Middle East, but Saudi Arabia calmed the market with extra supply.

Brent crude was steady around $112 per barrel, while U.S. crude for delivery in April rose 45 cents to $97.41 per barrel. Gold, which in February recorded its biggest monthly gain since August as worried investors sought safety, was up around $3 to $1,413.60 per ounce.

The U.S. Fed chief, who testifies on the Fed's twice-yearly report on monetary policy before the Senate Banking Committee, will probably nod to improvements in the economy while indicating there is still room for monetary policy to help.

One wildcard is the recent surge in oil prices. Bernanke is likely to see that as more of a headwind to growth than the spark for broad-based inflation as long as consumers and businesses do not become gripped by inflationary psychology.

"We expect continued cautious optimism about the durability of the recovery and the need for ongoing monetary policy accommodation," said Michael Gapen, economist at Barclays Capital.

Some of the Fed's more hawkish officials have said they would consider halting bond purchases ahead of the program's June deadline if a recent growth spurt persists. Bernanke has indicated he would prefer to see the plan through.

The Fed chairman, who will offer a repeat performance on Wednesday before a committee in the House of Representatives, is likely to be peppered with questions about the record U.S. budget gap.

To avoid becoming enmeshed in Washington's heated deficit debate, Bernanke will have to do the usual dodging and weaving. He has repeatedly called for long-term budgetary restraint, with a dose of caution about deep short-run spending cuts.

His testimony comes just days ahead of a possible government shutdown over ongoing budget battles, though inklings of a compromise have emerged from Capitol Hill.

In the past, Bernanke has suggested the U.S. economy might still be too fragile to handle a heavy-handed budget ax. U.S. gross domestic product grew at a 2.8 percent annual rate in the fourth quarter -- not fast enough to put a significant dent in the jobless rate, which closed out the year at 9 percent.

The bond-buying program that the Fed launched in November, which aims to keep down borrowing costs to support the recovery, has proven controversial both at home and abroad.

Emerging economies have accused the Fed of a back door dollar devaluation that amounts to a beggar-thy-neighbor policy. Domestic critics, including many Republican lawmakers, argue the policy sows the seeds of future inflation.

"My fear is that today the chairman is potentially creating a bigger mess for the Fed to mop up," Republican Congressman Jeb Hensarling, a member of the House Financial Services Committee, told a Reuters Summit on Monday.

If faced with such questions, Bernanke would likely make the case that the labor market is still in too weak for economic momentum to generate inflation.

By some barometers, inflation is still running too low for the Fed's comfort. The core personal consumption expenditures price index, which strips out food and energy costs, rose just 0.8 percent in the 12 months through January, just off a record low and far beneath the Fed's presumed comfort zone of 2 percent or a bit below.

Hiring, meanwhile, remains subdued. Analysts polled by Reuters believe the economy added around 185,000 new jobs in February, up from just 36,000 last month, but not enough to appreciably reduce the jobless rate.

In such an environment, the recent spike in the price of crude oil, which traded around $97 a barrel in New York on Monday, would probably be more of a threat to consumption rather than a catalyst for price increases.

New York Federal Reserve Bank President William Dudley said on Monday that even if job growth picked up to around 300,000 a month, employment conditions would still be quite weak at the end of 2012.

While the modest increase in spending, which accounts for 70 percent of economic activity, likely reflected some weather effects it also suggested spending would slow down after growing briskly in the final three months of 2010.

The Commerce Department said spending edged up 0.2 percent, the smallest increase in seven straight months of gains, after an upwardly revised 0.5 percent rise in December.

Economists polled by Reuters had expected a 0.4 percent rise in January. Real spending fell 0.1 percent, the first decline in a year, after rising 0.3 percent in December.

"On net it really doesn't change much, spending will probably continue to be resilient, stronger than this number going forward as January was affected by being post holidays and with the weather being a factor there," said Sean Incremona, an economist at 4Cast in New York.

Stock index futures held gains after the data, while government bond prices were little changed. The U.S. dollar drifted lower against the euro, but rose against the yen.

Spending in the fourth quarter grew at a 4.1 percent annual rate, the fastest in more than four years.

Incomes rose 1.0 percent last month, the largest increase since May 2009, after increasing 0.4 percent in December. The jump in income partly reflected the tax package enacted last year.

The increase in January outpaced economists' expectations for a 0.4 percent gain. Savings jumped to $677.1 billion, the highest level since August, from $620.9 billion in December.

The report also showed the Federal Reserve's preferred measure of consumer inflation -- the personal consumption expenditures price index, excluding food and energy - edged up 0.1 percent last month, after being unchanged in December.

In the 12 months through January, the core PCE index rose 0.8 percent after rising by the same margin in December.

Fed officials prefer the core personal consumption expenditures price index as a gauge of consumer inflation because it takes into account changes in spending habits by households.

They have maintained their view that core inflation rates remain too low, even as high food and energy prices have put global central banks on alert for inflation.

Fed Chairman Ben Bernanke testifies to Congress on Tuesday and Wednesday, and analysts do not expect him to depart much from the central bank's view of low inflation.

(Reporting by Lucia Mutikani, Additional reporting by Karen Brettell in New York; Editing by Andrea Ricci)

U.S. crude oil futures rose on Monday, hovering below the $100-a-barrel mark, as protests in Oman fueled concerns about the security of supplies from the Middle East and North Africa.

In Libya rebels awaited a counter-attack by Muammar Gaddafi's forces on Monday, after the country's leader defied demands that he quit to end the bloodiest of the Arab world's wave of uprisings. Rebels holding Zawiyah, only 50 km (30 miles) west of Tripoli, said about 2,000 troops loyal to Gaddafi had surrounded the city.

J.P. Morgan has raised its average forecast for Brent crude by nearly 14 percent for 2011 as the supply-demand situation is expected to tighten on Libyan output losses.

The dollar hovered close to three-month lows on Monday, hampered by expectations that the threat to growth from high oil prices would keep U.S. monetary policy loose, in contrast to the more hawkish outlooks of other major central banks.

Playing for time to overcome a deep partisan impasse over the U.S. budget, senior lawmakers backed away on Sunday from a possible government shutdown.

Private equity firm Blackstone Group (BX.N) will pay about $9.4 billion for nearly 600 U.S. shopping malls and other properties of Australia's debt-laden Centro Properties (CNP.AX), a source with direct knowledge of the transaction said on Monday.

HSBC (HSBA.L) (0005.HK), Europe's biggest bank, cut its profitability targets due to the cost of tougher global bank regulations on Monday, and disappointed investors as its 2010 profits came in slightly below analysts' forecasts. Its shares traded in London were down 3.8 percent.

On the macro front, investors are expected to keep an eye on the National Association of Realtors' pending home sales for January, while on the earnings front, companies due to report results include AES Corp. (AES.N), Edison International (EIX.N) and Range Resources (RRC.N).

U.S. stocks rose on Friday, bouncing back from a three-day sell-off as oil prices stabilized, but unease over the Libyan rebellion was seen as likely to keep buying in check.

The Dow Jones industrial average .DJI gained 61.95 points, or 0.51 percent, to end at 12,130.45. The Standard & Poor's 500 Index .SPX advanced 13.78 points, or 1.06 percent, to finish at 1,319.88. The Nasdaq Composite Index .IXIC rose 43.15 points, or 1.58 percent, to close at 2,781.05.

(Reporting by Blaise Robinson; Editing by Greg Mahlich)

The bank's pretax profit for the year ending December 31 more than doubled from 2009 to $19 billion, but this figure came in below the average pretax profit forecast of $20 billion, according to analysts polled by Reuters Estimates.

HSBC said on Monday it had made a good start to the year but new chief executive Stuart Gulliver cut the bank's long-term return on equity (ROE) target to 12-15 percent from a previous 15-19 percent target.

HSBC shares, which had been trading up 2 percent before the results, fell back and were down 4.5 percent at 679.5 pence by 1005 GMT.

TOUGHER CAPITAL RULES

HSBC's shares were at their lowest level in nearly a month, and were the among the worst performers on Britain's benchmark FTSE 100 index, which was down by 0.6 percent.

HSBC also weighed on the European banking index, which fell 1.3 percent.

"The underlying pretax profit is significantly disappointing," said Canaccord Genuity analyst Cormac Leech.

Banks around the world are under pressure from regulators to raise capital to strengthen their balance sheets, in order to prevent a return of the 2008 credit crisis which resulted in the collapse of Lehman Brothers.

HSBC CEO Gulliver said he did not think that HSBC would need a rights issue to raise new capital.

However, its finance director Iain Mackay said the bank's new, scaled back return on equity target reflected the tougher capital requirements for banks, as well as global economic uncertainty, as highlighted by recent political tensions in the Middle East and north Africa.

"We've targeted 12 to 15 percent through the cycle for return on equity, principally taking into consideration what we view as a somewhat unstable and uneven economic recovery over the coming years as well as much higher capital requirements," said Mackay.

HSBC's decision to cut back its return on equity targets followed a similar move by rivals Barclays and Credit Suisse.

Both those lenders scaled back their profitability expectations, saying their returns would be held in check by regulatory requirements to hold more capital.

Gulliver took over as CEO from Michael Geoghegan at the start of the year. Gulliver, Chairman Douglas Flint and Finance Director Iain MacKay took the helm after a boardroom power struggle erupted in September.