Asian shares on Thursday latched on to a dramatic surge on Wall Street as markets, battered by a recent drum roll of deepening political and economic gloom, cheered upbeat U.S. data and the Trump administration's effort to shore up investor confidence.
In a buying frenzy that was as spectacular as the recent rout, U.S. stocks soared with the Dow Jones Industrial Average rocketing more than 1,000 points for the first time on Wednesday.
That helped push MSCI's broadest index of Asia-Pacific shares outside Japan up about 0.9 per cent and away from eight-week lows.
Australian shares jumped 1.5 per cent as trading resumed after the Christmas break, while Japan's Nikkei pulled out of bear market territory it had entered on Tuesday, surging 3.7 per cent in mid-morning trading.
There was no single trigger for the overnight relief rally on Wall Street, though a Mastercard Inc report that sales during the U.S. holiday shopping season rose the most in six years in 2018 helped clam frayed nerves.
There was also some attempts by the White House to temper its broadside against the Federal Reserve. Kevin Hassett, chairman of the White House Council of Economic Advisers, said on Wednesday that Fed Chairman Jerome Powell's job was not in jeopardy.
His comments came just days after President Donald Trump described the Fed as the “only problem” to the U.S. economy after the central bank last week raised rates for the fourth time this year, and retained plans for more hikes in 2019.
A U.S. government shutdown, concerns over slower global growth and U.S. Treasury Secretary Steven Mnuchin convening a crisis group following the sharp sell-off in equities have also rattled investors.
Faced with deepening gloom, investors were quick to latch on to media reports that a U.S. trade team will travel to Beijing the week of Jan. 7 to hold talks with Chinese officials.
“Investors are aware of negative factors, but they aren't paying attention to those. They are looking at the Dow's $1,000 gain...Short-covering will likely be a major theme today,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
“I think worries regarding the U.S. government shutdown as well as lack of clarity over whether the U.S.-Sino negotiations (over trade) will go well or not still remain,” he said.
After the overnight rally, E-Mini futures for the S&P 500 were last down nearly half a per cent.
Oil jumps, Dollar supported
Oil also caught investors' attention after U.S. crude and Brent overnight both marked their largest single-day rises since late November 2016.
U.S. crude on Wednesday rallied almost 8.7 per cent, while Brent jumped more than 8.8 per cent in a partial rebound from steep losses that pushed crude benchmarks to lows not seen since last year.
U.S. crude was last trading 0.8 per cent lower at $45.86 a barrel, while Brent gave up 0.9 per cent at $53.98 a barrel.
As investors moved back into riskier assets overnight, 10-year U.S. Treasury yields rose and last stood at 2.801 per cent, about 10 basis point off their lowest since April hit in Asian trading on Wednesday.
The shift into riskier assets provided support to the dollar, which rose around 1 per cent against the yen to 111.41 overnight - its largest single-day gain against the safe-haven Japanese currency since late April.
The dollar gave up some of those overnight gains in early Asian trade on Thursday, last off 0.3 per cent at 111.05 yen.
The U.S. currency also took a breather against the euro and the British pound, losing about 0.2 per cent against both currencies, to $1.1372 and $1.2655, respectively.
Against a basket of currencies, the dollar was a shade weaker at 96.932.
In commodity markets, gold remained below a six-month peak hit during the previous session. Spot gold edged higher to $1,271.20, but its gains were capped as investors ventured back into riskier assets.