Asian shares trim losses, while dollar firms on Powell's rate pain warning

SHANGHAI : Asian shares found some footing after a volatile session for U.S. equities, but the dollar remained at 20-year highs and global stocks near 18-month lows on worries about persistently high inflation and tightening central banks.

Those worries ultimately overcame hopes on Wall Street that high inflation might be peaking, pushing the S&P 500 close to confirming a bear market on Thursday, at nearly 20 per cent off its January all-time high.

In an interview later in the day, U.S. Federal Reserve Chair Jerome Powell said that the battle to control inflation would "include some pain". And he repeated his expectation of half-percentage-point interest rate rises at each of the Fed's next two policy meetings, while pledging that "we're prepared to do more".

But after fears of the impact of central bank tightening led to sharp losses a day earlier, Asian shares bounced early in the trading day.

MSCI's broadest index of Asia-Pacific shares outside Japan was up 1.15 per cent, trimming its losses for the week to around 3.5 per cent.

Australian shares were up 1.56 per cent, while Japan's Nikkei stock index jumped 2.62 per cent.

In China, the blue-chip CSI300 index was up 0.92 per cent and Hong Kong's Hang Seng rose 1.8 per cent.

"We had some pretty big moves yesterday, and when you see those big moves it's only natural to get some retracement, especially since it's Friday heading into the weekend. There's not really a new narrative that's come through, " said Matt Simpson, senior market analyst at City Index.

"I think there comes that point where you run out of sellers. I'm not really certain that this is going to be a buying rally at the moment, possibly a short-covering rally ahead of the weekend."

The moves higher in equities were mirrored in slipping U.S. Treasuries, with the benchmark U.S. 10-year yield edging up to 2.8931 per cent from a close of 2.817 per cent on Thursday.

The policy-sensitive 2-year yield was at 2.6023 per cent, up from a close of 2.522 per cent.

"Within the shape of the U.S. Treasury curve we are not seeing any particularly fresh recession/slowdown signal, just the same consistent marked slowing earmarked for H2 2023," Alan Ruskin, macro strategist at Deutsche Bank, said in a note.

The U.S. dollar nevertheless remained firm near 20-year highs, with the dollar index, which tracks it against a basket of currencies of other major trading partners, at 104.8.

The yen was at 129.02 per dollar, softening from a two-week peak of 127.5 hit overnight. The European single currency edged down a hair to $1.0376.

In commodities markets, oil prices were higher but still set for their first weekly loss in three weeks, hit by concerns over inflation and China's COVID lockdowns slowing global growth.

U.S. crude ticked up 1.34 per cent to $107.55 a barrel, and global benchrmark Brent crude was up 1.51 per cent at $109.07 per barrel.

Spot gold, which has been hit by the soaring dollar, was up 0.15 per cent at $1,824.49 per ounce, not far from a three-month low.