Asian shares leapt to a three-week high on Wednesday, powered by financial and resource shares after investors bought commodities on a weaker dollar, while Hong Kong shares shrugged off China's latest move to temper robust lending.
The Hang Seng rose 1.8 percent after a long Lunar New Year holiday break, with Chinese bank stocks such as Bank of China surging in reaction to Friday's surprise hike in bank reserve requirements by Beijing as it tries to moderate credit growth and inflationary pressures.
The announcement, which came on the heels of a similar move last month and was earlier than expected, had rattled markets on Friday by raising investors' fears that tighter policies in the world's third-largest economy would be more aggressive than thought and may damage global growth.
By the time Hong Kong stocks opened on Wednesday much of the initial excitement appeared to have dissipated.
It seems that the market has already factored in the reserve ratio requirement increases, said Castor Pang, research director at Cinda International. The Hang Seng and the A share market have dropped too much recently.
Shanghai markets remain shut this week.
Shares in Europe were set to extend gains, with Britain's FTSE 100 to open up as much as 0.6 percent and France's CAC to open up as much as 0.9 percent, financial bookmakers said.
Japan's benchmark Nikkei average gained 2.7 percent for its biggest one-day percentage gain since December 3, but trading volume was one of the thinnest this year, with market players unsure how long the rebound will last.
The MSCI index of Asian shares outside Japan rose 1.8 percent, touching its highest level in three weeks.
Resource shares gained after copper led a rally across the broader base metals complex on Tuesday as the dollar stumbled and as equities markets recovered from a sell-off in recent weeks that was triggered by growing debt problems in Greece and fears that the global economic recovery was losing momentum.
U.S. stocks posted gains of as much as 1.8 percent overnight as traders returned from a three-day break, helped by strong New York State factory data and gains in Europe, where shares were buoyed by upbeat results from UK bank Barclays.
There's a bit more of a shift to riskier assets, especially those linked to commodities, and this may continue for a day or two, said Tomomi Yamashita, a fund manager at Shinkin Asset Management in Tokyo.
There's no question that the U.S. economy is improving, especially if you look at indicators, although this does raise the question of when we could expect an interest rate hike.
Toyota Motor was flat after U.S. regulators opened an investigation into whether it had acted in a timely way to recall cars for acceleration problems. The automaker also moved to slow its U.S. production.
In Seoul, shares rose 1.7 percent as the U.S. data fueled foreign buying of financial and technology stocks, but a fall in the dollar and strengthening in the won limited gains in Hyundai Motor and other exporters.
In the afternoon, South Korea's foreign exchange authorities were buying dollars to curb the won's strength.
Australian stocks rallied 2.2 percent, the biggest one-day gain in two-and-a-half months.
Top miners BHP Billiton and Rio Tinto climbed 2.1 and 3.3 percent respectively as investors eyeing strong growth in Asia piled into industrial metals.
The dollar index, a gauge of its strength against six other major currencies, was unchanged from late U.S. levels after shedding 0.8 percent the previous session and hitting its lowest level in a week. It was the biggest one-day fall since November.
The euro held steady after surging 1.3 percent against the dollar on Tuesday. Investors were still cautious, however, wary that Greece's debt problems have yet to be solved, and the euro remains highly sensitive to more negative fiscal news.
It was trading at $1.3769, steady on the day and well above last week's nine-month low of $1.3532.
Gold prices steadied near two-week highs, with spot gold at $1,119 an ounce.
U.S. crude futures edged higher above $77 a barrel.
(Additional reporting by Charlotte Cooper and Satomi Noguchi in TOKYO, Victoria Thieberger in MELBOURNE and Sui-Lee Wee in HONG KONG; Editing by Michael Watson & Jan Dahinten)