(AFP) Equities rose in most cities Tuesday in Asia as some stability returned to markets after last week's upheaval, but analysts warned of further pain for traders after central bank officials hinted at more interest rate hikes to reel in inflation.
While there was no catalyst from Wall Street owing to a public holiday, a healthy performance across Europe provided a little boost and bargain-buying was also lending support.
However, there remains an overarching sense of gloom as traders speculate that the sharp lift in borrowing costs around the world will tip economies into recession.
Focus this week is on Federal Reserve boss Jerome Powell's two days of testimony to lawmakers in Washington, which will be closely watched for insight into the bank's thinking and possible clues about its plans for fighting surging prices.
The Fed announced a three-quarter point lift last week, after inflation data days earlier had smashed forecasts and hit a four-decade high.
"While (investors do) not expect Powell to reinvent the policy wheel, we could expect him to reinforce the idea that the Fed is in data-dependent mode," said Stephen Innes of SPI Asset Management.
"Hence, any shift in Fed rhetoric will be a function of incoming data, virtually all of which now presents event risk. From that perspective, further evidence of persistent inflation will trigger policy panic, while any signs of sluggish growth momentum will confirm the recession narrative.
"Neither suggests that now is the time to board the rally wagon."
Tokyo, Hong Kong, Sydney, Seoul, Singapore, Wellington, Taipei, Mumbai, Bangkok and Jakarta all rose but Shanghai and Manila slipped.
London opened barely moved, while Paris and Frankfurt edged up.
"There might be a narrative that we've hit a bottom, we are oversold, the Fed is taking inflation seriously and that might be slightly bullish in the interim," Frances Stacy, of Optimal Capital, told Bloomberg TV.
However, while the volatility of last week has gone, banks' intention to continue hiking rates could cause fresh ructions.
Several officials -- including at the Fed, Bank of England, Reserve Bank of Australia and European Central Bank -- have come out in recent days to flag a further tightening of borrowing costs.
In commodities markets, oil extended gains as traders moved back in after Friday's plunge fuelled by concerns over a possible recession.
The gains have been helped by optimism for a boost to demand as China gradually eases out of its period of Covid containment, while the US summer driving period picks up.
"The physical market is as tight as ever, and thus, the speculative capitulation in futures markets (on Friday) probably shouldn't be taken as a picture of the reality on the ground in the real world," said OANDA's Jeffrey Halley.
"The bottom line seems to be that until we see physical demand destruction, oil and other energy markets are as tight as ever."
- Key figures at around 0810 GMT -
Tokyo - Nikkei 225: UP 1.8 percent at 26,246.31 (close)
Hong Kong - Hang Seng Index: UP 1.9 percent at 21,559.59 (close)
Shanghai - Composite: DOWN 0.3 percent at 3,306.72 (close)
London - FTSE 100: UP 0.6 percent at 7,160.94
Dollar/yen: UP at 135.25 yen from 135.06 yen
Pound/dollar: UP at $1.2292 from $1.2243
Euro/dollar: UP at $1.0556 from $1.0528 Monday
Euro/pound: DOWN at 85.85 pence from 86.02 pence
West Texas Intermediate: UP 1.6 percent at $111.27
Brent North Sea crude: UP 0.9 percent at $115.18 per barrel
New York - Dow: DOWN 0.1 percent at 29,888.78 (close)