* Risk appetite revived as geopolitical tensions ease
* Market talk of slower-than-expected Chinese inflation
* Shanghai stocks lead Asian markets higher (Updates prices)
By Ian Chua
SYDNEY, Feb 14 (Reuters) - Asian stocks rallied on Monday, snapping five straight sessions of losses, as talk of slower-than-expected Chinese inflation helped drive Shanghai's main share index to its best level in seven weeks.
European equity markets were expected to open higher, with financial spreadbetters calling Britain's FTSE 100 up 0.2 percent, Germany's DAX up 0.3 percent and France's CAC-40 up 0.5 percent.
Emerging Asia equity markets were among the best performers, following a recent sell-off on worries about whether authorities will be successful in tackling inflation.
"Ultimately I think they will be successful, but we probably won't know that until mid-year or second half of the year. In the meantime markets will be worried about it periodically," said Shane Oliver, head of investment strategy at AMP Capital Investors in Sydney.
"Asian markets have had a sharp fall year-to-date. The good news coming out of Egypt, which sparked a rally in the U.S. and Europe has flowed through to Asia."
Egyptian President Hosni Mubarak has handed power over to the army, bowing to escalating pressure from the military and protesters demanding he goes. His departure helped ease geopolitical tensions and partially revived investors' appetite for risk.
The Nikkei climbed 1.1 percent, while shares elsewhere in Asia gained 1.7 percent, bouncing off 2-1/2 month lows set last Friday.
Australia's S&P/ASX 200 index rose 1.1 percent, Hong Kong's Hang Seng index put on 1.1 percent and the Shanghai Composite Index advanced 2.2 percent.
Traders said China's consumer price index may have risen 4.9 percent in the year to January, well below the consensus forecast of 5.3 percent, a day ahead of the official release.
There was little reaction to data showing Japan's economy shrank less than expected in the final quarter of last year. Analysts expect a recovery this year on stronger exports to China and other parts of fast-growing Asia.
Data on Monday showed China's imports rose 51 percent in January, blowing past forecasts for a 28 percent rise, underscoring the country's efforts to shift its economy towards greater reliance on domestic consumption.
Last week, the MSCI Asia Pacific equity index, excluding Japan, fell 2.65 percent, suffering its biggest weekly drop since Aug. 2010.
Investors pulled out some $3 billion from Emerging Markets Equity Funds tracked by EPFR Global in the week ended Feb. 9. This marked a third straight week of outflows and was the worst three-week run in three years, the fund tracker said.
But Japanese equities, which lagged the region last year, saw some of the best inflows. Japan still has a low price-to-book ratio of 1.2, according to Thomson Reuters StarMine, among the most attractive in Asia. This compares with 2.0 for Hong Kong and 2.5 for Australia.
"Investors are seeing value in Japanese exporters geared to fast growing regional emerging markets where the yen's value versus the dollar is not an issue. Inflation is also not an issue for the world's third largest economy," the fund tracker said.
According to figures from Nomura, foreign investors have bought $12.2 billion worth of Japanese stocks so far this year. They sold $210 million of Asian stocks excluding Japan.
"Developed markets tend to be much better at dealing with higher input costs from particularly commodities and energy, because they're less sensitive to those factors," said Sean Darby, chief Asian equity strategist at Nomura in Hong Kong.
In the currency market, the dollar eased against a basket of major currencies. Versus the yen, it slipped 0.5 percent to 83.15 as Japanese exporters sold the greenback, taking advantage of its rise last week to a three-week high.
U.S. crude steadied near $85.50 per barrel after falling to 10-week lows, while copper edged up 0.7 percent to $10,030 a tonne. Spot gold was little changed at $1,358 an ounce. (Additional reporting by Emma Ashburn in Hong Kong; Editing by Alex Richardson)