HONG KONG: Asian shares eked out their best day in a week on Tuesday as positive economic data and hints of easing Sino-U.S. tensions offered some respite after recent sell-offs, though fears of a global recession and sky-high inflation tempered the mood.

MSCI's gauge of Asia Pacific stocks outside Japan rose 0.45%, on track for its best day since late June, while EUROSTOXX 50 futures added 0.5% and S&P500 e-mini futures 0.4%, indicating a positive start for equities in European and U.S. trading.

Still, the Asian regional index has fallen 16.86% so far this year, as worries that central banks around the world will push economies into recession to break red-hot inflation have sent investors running for cover.

Offering brief respite to nervous markets was a report that U.S. president Joe Biden was leaning towards a decision on easing tariffs on goods from China as well as news Chinese vice premier Liu He had spoken to U.S. Treasury Secretary Janet Yellen, said Redmond Wong，market strategist, Greater China, at Saxo Markets Hong Kong.

A survey showing China's services activity grew at the fastest pace in almost a year also helped sentiment, he said.

Overnight, the Wall Street Journal reported Biden was contemplating rolling back some tariffs on Chinese imports in an effort to slow inflation.

Hong Kong's Hang Seng Index rose 0.25%, though mainland Chinese share gave up their early gains after the services data as concerns of a flare-up in COVID-19 cases overshadowed optimism, with blue chips last down 0.75%.

"The highly uncertain COVID-19 development still poses persistent pressures on the future recovery of the service sector, which calls for sustained and targeted policy support," said Shanshan Song, HSBC's Greater China economist, in a Tuesday note on China's services data.

There was also positive data from Japan where the country's services sector activity expanded at the fastest pace in over eight years in June as the easing of coronavirus curbs boosted sentiment among businesses such as those in tourism, helping the Nikkei to rise 1.05%.

Referring to the global growth and inflation dynamics, Saxo Markets' Wong said: "Market participants are still assessing the impact of the tug of war between inflation being at persistently elevated levels and signs pointing to potentially an incoming U.S. recession."

Those concerns were front and centre in South Korea, where June inflation accelerated to the fastest pace since the Asian financial crisis, fanning expectations the central bank could deliver a 50 basis point rake hike for the first time next week to cool prices.

Australia's central bank also on Tuesday raised its cash rate by 50 basis points to 1.35%, its third successive increase, and flagged more tightening ahead as it struggles to contain surging inflation.

With the Reserve Bank of Australia meeting market expectations on the policy front, the risk-friendly Australian dollar was little changed at $0.6871.

The euro did benefit from the improved risk sentiment however, gaining 0.23%.

U.S. treasury yields returned from the holiday higher, with the yield on benchmark 10 year notes at 2.952% but failing to push back above the symbolic 3% level.

Brent crude futures gave up early gains to trade down 0.2% at $113.28 a barrel. Spot gold was up 0.08% at $1810.48 an ounce, paring Monday's losses.

 - Reuters