 "Asian stocks set to test February peak after upbeat US data")
Asian shares look set to test February highs on Wednesday as signs of recovery in the US manufacturing sector and gains in oil prices eased worries about a global slowdown and pushed US stocks sharply higher.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.6% in early trade, coming within striking distance of last month's peak touched on February 23, its highest since early January.
Chicago-listed futures point to a 2.6% gains in Japan's Nikkei.
"I expect a big jump in the Nikkei today. The sluggishness in US manufacturing had been a major concern. If the manufacturing sector is springing back to life, that will also revive expectations of a Fed rate hike," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.
The Institute for Supply Management's (ISM) index of factory activity, a closely-watched measure of the US manufacturing sector, rose more than expected last month. It also edged up for two months in a row, appearing to have snapped its almost continuous decline since late 2014.
US construction spending rose to the highest level since October 2007.
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The data helped lift the US S&P 500 Index 2.39% to an eight-week high of 1,978.35.
MSCI's broadest gauge of the world's stock markets also rose to highest level in almost two months.
Investors unwound bets in safe-haven assets such as government bonds, with the 10-year US Treasuries yield shooting up to 1.827% on Tuesday from 1.740% the previous day.
The policy-rate sensitive two-year yield rose to 0.849% from 0.789%.
US interest rate futures are pricing in the Fed funds rate of 0.65% in January, effectively pricing in a full chance of a rate hike this year.
As the prospects of higher US rates burnished the dollar's yield attraction, the dollar's index against a basket of six major currencies rose to a one-month high of 98.57.
Against the yen, the dollar rose to 114.05 yen , recovering further from its double-bottom near 111 hit last month.
The euro hit a one-month low of $1.0834 on Tuesday, staying under pressure as investors expect the European Central Bank to step up its monetary stimulus at its policy meeting next week. It last stood at $1.0870.
The Canadian dollar rose to a three-month high of C$1.3387 per US dollar thanks to the recovery in oil prices.
In the oil market, Brent crude futures hit eight-week high of $37.25 per barrel, up more than $10, or 37.5%, from a 12-year low of $27.10 hit in January.
US crude futures also hit a one-month high of $34.76 per barrel although gains were cut in post-settlement trade on Tuesday after data suggesting a huge build in US crude stockpiles already at record high levels.
Market players are also keeping an eye on US Super Tuesday, where Donald Trump looked poised to strengthen his lead in the Republican presidential race.
While the implication from a victory by Trump is far from clear, his isolationist remarks have raised alarm among investors that his popularity could tilt Washington towards unilateralism when markets want more international cooperation to fight a slowing global growth.