Asia Shares Join Global Rebound On Easing Of Fed Hike Fears, China Tech Boost

Asian shares on Friday extended overnight global gains thanks to strong results from regional tech firms and U.S. retailers, while investors also took comfort from Federal Reserve minutes suggesting it could pause its rapid rate hikes later this year.

The swing in sentiment left the dollar wallowing at one-month lows, with the euro rising to its highest since April 25.

However, the optimism is likely to fade when the European markets open. The pan-region Euro Stoxx 50 futures were flat, German DAX futures were down 0.02% while FTSE futures were 0.34% lower.

Both Nasdaq futures and S&P500 futures eased 0.1%.

In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan rallied 1.8%, the biggest gain in a week, buoyed by a 2.8% jump in Hong Kong stocks as Chinese tech firms got a boost from better-than-expected first-quarter revenue growth from Alibaba and Baidu, as well as hopes of stabilising Sino-U.S. ties and more government stimulus.

Japan's Nikkei advanced 0.6%, China's mainland blue-chips rose 0.6%,and Australia's resources-heavy index climbed 1.1%.

The United States will not block China from growing its economy, but wants it to adhere to international rules, Secretary of State Antony Blinken said on Thursday in remarks that some investors interpreted as positive for bilateral ties.

Wall Street closed sharply higher overnight after optimistic retail earnings outlooks and waning concerns about overly aggressive interest rate hikes by the Fed encouraged buyers.

The Dow Jones Industrial Average rose 1.61%, the S&P 500 gained 1.99%, and the Nasdaq Composite 2.68%.

Upbeat guidance from retailers such as Department store operator Macy's Inc, discount chains Dollar General Corp and Dollar Tree appeared to offset dour warnings from their peers in recent weeks.

"Despite the fact that the five day gains on Wall St now at and above 4% suggests that the meltdown has been snapped, there should be no mistaking that this is but earnings relief; - and should not prematurely inspire proclamations of a bull market reboot," said analysts at Mizuho Bank.

Tapas Strickland, a director of economics and markets at NAB, said "equities are sitting in the glow of the FOMC Minutes on Wednesday where it appears markets have interpreted them as opening up the possibility of a Fed pause in Q4 2022, while some note the front loading of hikes may have tightened financial conditions sufficiently."

The Fed's minutes of its May meeting released on Wednesday confirmed two more 50-basis point hikes each in June and July, but policymakers also suggested the potential for a pause later in the year.

Still, the lift in equities has not spilt over to other asset markets, with bond yields broadly steady, Strickland noted.

On Friday, the yield on benchmark 10-year Treasury notes rose slightly to 2.7504% compared with its close of 2.7416% on Thursday. It had hit a three-year high of 3.2030% earlier this month on fears rapid hikes from the Fed may undermine long-term growth.

The two-year yield, which rises with traders' expectations of higher Fed fund rates, touched 2.4618% compared with a close of 2.4778%.

"The fall in U.S. Treasury yields in the meantime has correlated with falls in inflation expectations, which had been above 3% in the 10yr, and are now in the 2.6% area. All in all, a pronounced decompression of stress," said analysts at ING in a note.

In the currency markets, the U.S. dollar fell 0.2% against a basket of major currencies, further pulling away from its 20-year peaks hit two weeks ago. The euro gained 0.28% against the greenback. [FRX/]

Oil prices hovered around a two-month high, with Brent crude on track for its biggest weekly jump in 1-1/2 months, supported by the prospect of an EU ban on Russian oil and the coming summer driving season in the United States.

U.S. crude climbed 0.08% to $114.22 a barrel. Brent crude rose 0.13%% to $117.55 per barrel. [O/R]

Gold was slightly higher. Spot gold was traded at $1851.89 per ounce. [GOL/]

(Editing by Shri Navaratnam and Kim Coghill)