HONG KONG (Reuters) - Asian stocks rose sharply on Monday, helped by a smaller-than-expected loss at Citigroup that provided comfort about the financial sector's stability ahead of more results this week from banks and industrial companies.

Oil prices, having tumbled in the past week or so by more than $17 from a record high above $147 a barrel, also supported shares of exporters in the region.

Depending largely on how quarterly earnings look at companies like Bank of America Corp, Caterpillar Inc and Honda Motor Co, equity markets this week could extend their rally or just as easily fall on their face.

"It is too premature to assume that the bull market is coming back," said Albert Hung, chief investment officer at Alleron Investment Management in Sydney.

"There are some concerns that the earnings growth forecast for fiscal 2009 is still too high so there may be some earnings revision downwards."

Markets in Japan were closed for a public holiday, thinning liquidity in the region.

Hong Kong's Hang Seng rose 3 percent, with HSBC leading the way.

South Korea's benchmark KOSPI jumped 3.6 percent, led by gains in the shares of index heavyweights Samsung Electronics and the world's fourth-largest steel maker POSCO.

LG Electronics Inc shares surged 6 percent on expectations the company's bottom line doubled.

Australia's S&P/ASX 200 index climbed 3.2 percent, lifted by banks such as National Australia Bank and Commonwealth Bank of Australia Ltd.

The MSCI index of Asia-Pacific shares outside of Japan was up 2.9 percent on the day but is down 22 percent so far this year.

Concerns about the global impact of a weak U.S. financial sector have eased after Citigroup, the largest U.S. bank, reported a second-quarter loss of $2.5 billion, which was smaller than expected.

However, the picture painted by higher-than-expected results from JPMorgan, Citigroup and IBM was tainted somewhat by lower-than-forecast results from technology sector bellwethers such as Google Inc and Microsoft Corp.

In addition, food and energy prices -- though well off their peaks -- continue to fuel inflation at a time when the global economy is slowing down.

Indeed, Bank of England policymaker David Blanchflower told a UK newspaper the British economy is heading into recession and the benchmark interest rate should fall "well below" the current 5 percent. His comments weighed on sterling.

The U.S. dollar, which rose broadly last week, slipped against the euro and the yen on Monday ahead of the raft of bank earnings this week that will provide the latest test for sentiment on the financial sector.

"JPMorgan and Citi might have done OK, but this week brings reports from WaMu and Wachovia, two institutions that have been singed by the subprime debacle," said David Watt, a senior currency strategist at RBC Dominion Securities.

"Given that few of the major currencies seem attractive to investors at the present time, a sad-sack performance is appropriate," he added, noting that the euro and sterling had economic troubles of their own.

The euro rose 0.2 percent to $1.5862, about two cents below an all-time high touched last week. Against the yen, the dollar was down 0.1 percent at 106.78 yen.

Crude prices edged up from late New York levels but remained below $130 a barrel as talks between world powers and nuclear ambitious Iran, the fourth largest oil exporter, proved inconclusive.

Still, oil fell 11 percent last week, the most since December 2004, on the view that consumer and industrial demand is slowing.

(Additional reporting by Geraldine Chua in Sydney)

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