Hopes for the US economy, boosted by forecast-beating manufacturing data, provided investors a much-needed catalyst for a rally on Wall Street.
Healthy gains chalked up through January appeared to be in danger at the start of the week as the dollar soared on news that Donald Trump had tapped Kevin Warsh -- considered the most hawkish of his candidates -- to head the Federal Reserve.
Analysts said the choice of Warsh, a former Fed governor and Morgan Stanley investment banker, raised the prospect that central bank policy could be more supportive of the greenback.
The US currency had been taking a battering from its peers last week on concerns that the US president was happy to see it weaken, which would support exporters. Trump's choice also eased concerns about the Fed's independence.
The dollar's sharp recovery sent precious metals plunging at an eye-watering pace, with gold hitting a low of $4,402 and silver $71 -- having enjoyed equally blistering gains in recent weeks to record highs above $5,595 and $121.
The rush out of the safe-haven metals was also driven by easing US-Iran tensions after Trump voiced optimism over a deal with Tehran, having warned of possible strikes on the Islamic republic.
That, combined with the stronger dollar, also sent oil prices plunging at breakneck speed.
However, some calm returned to markets Tuesday following a rally in New York, which came thanks to figures showing US manufacturing activity grew in January at its fastest pace since 2022. It also marked the first expansion in 12 months.
A return into all things AI provided a huge boost after trader concerns about a bubble in the tech sector saw them offload big-name firms. However, they remain on edge about the vast sums pumped into the AI arena as questions swirl about when they will see profits.
Seoul's Kospi stock index was the best performer, piling on 6.7 percent and wiping out Monday's losses. The tech-rich market has climbed around 25 percent already this year.
Tuesday's gains were led by titan Samsung's 11 percent surge and chip maker SK hynix's 9.3 percent advance.
Monday's "decline wasn't about the fundamentals of the AI and semiconductor sectors. It happened because liquidity?sensitive assets such as gold and silver plunged sharply", wrote Chung Hae-chang, analyst at Daishin Securities.
- 'Scars and war wounds' -
Tokyo, which is also home to big-name tech firms, also enjoyed a bounce, adding nearly four percent, while Hong Kong, Shanghai, Sydney, Singapore, Taipei, Bangkok, Wellington and Manila also advanced.
Mumbai's Nifty index soared almost five percent as investors welcomed Trump's announcement of a US-India trade deal. He also pledged to cut tariffs on the country's goods after after Prime Minister Narendra Modi promised to stop buying Russian oil over the war in Ukraine.
Jakarta rose more than one percent, having been battered since Thursday, when index compiler MSCI raised concerns about ownership issues with Indonesian regulators and said it would hold off adding the nation's stocks to its indexes or increasing their weighting.
London extended gains at the open, having ended at a record Monday, while Paris and Frankfurt also rose.
"It's been a more orderly and calmer affair across markets, with growing signs that traders are ready to re-engage with pro-risk positions and sell equity index volatility," said Pepperstone's Chris Weston.
Oil prices edged down but tempered the sharp losses suffered Monday.
Traders are keeping tabs on Washington after Trump urged the House of Representatives to swiftly adopt a spending bill and end the three-day government shutdown.
"I hope all Republicans and Democrats will join me in supporting this Bill, and send it to my desk WITHOUT DELAY," Trump said in a post on Truth Social.
The shutdown followed a breakdown in negotiations because of Democratic anger over the killing of two protesters in Minneapolis by federal immigration agents, which derailed talks over new money for the Department of Homeland Security.
Mike Johnson, speaker of the Republican-controlled House, has expressed optimism that an agreement is imminent.
- Key figures at around 0815 GMT -
Tokyo - Nikkei 225: UP 3.9 percent at 54,720.66 (close)
Hong Kong - Hang Seng Index: UP 0.2 percent at 26,834.77 (close)
Shanghai - Composite: UP 1.3 percent at 4,067.74 (close)
London - FTSE 100: UP 0.2 percent at 10,361.92
Dollar/yen: DOWN at 155.40 yen from 155.60 yen on Monday
Euro/dollar: UP at $1.1816 from $1.1793
Pound/dollar: UP at $1.3696 from $1.3667
Euro/pound: DOWN at 86.28 pence from 86.29 pence
West Texas Intermediate: DOWN 0.4 percent at $61.92 per barrel
Brent North Sea Crude: DOWN 0.4 percent at $66.02 per barrel
New York - Dow: UP 1.1 percent at 49,407.66 (close)
dan/fox
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