Oil has hit its highest since the Omicron outbreak, world stocks have risen to one-week peaks and the dollar has plumbed six-week lows after US Federal Reserve Chair Jerome Powell sounded less bullish on rates than expected in testimony to Congress.
Powell told a congressional hearing on his confirmation for a second term at the helm of the central bank that the economy could weather the COVID-19 surge and was ready for tighter monetary policy, but said it may take several months to make a decision on running down the Fed's $9 trillion balance sheet.
Brent crude futures touched $84 a barrel for the first time in two months and US crude futures crept up 0.1 per cent to $81.35 a barrel on expectations fuel demand will continue to strengthen as the Fed is seen raising interest rates more slowly than expected.
Brent and US crude oil futures are trading at their highest since the highly contagious Omicron COVID-19 variant emerged in late November, as it has not impacted fuel demand the way previous variants did.
"Omicron is yesterday's story now", said Luca Paolini, chief strategist at Pictet Asset Management.
"The market isn't moving on Omicron but on earnings, Fed and economic data."
MSCI world stocks rose 0.42 per cent and S&P futures gained 0.11 per cent after the Nasdaq and S&P 500 recorded their best sessions of 2022, rising 1.4 per cent and 0.9 per cent, respectively.
European stocks rose 0.29 per cent and Britain's FTSE 100 climbed 0.51 per cent.
The dollar has dropped through its 200-day moving average against a basket of currencies and touched a six-week low of 95.533.
It also hit a 2022 low against the euro at $1.1378 and was steady at 115.385 yen.
Traders are bracing for inflation data at 1330 GMT, with headline US inflation expected to hit an almost four-decade high of 7 per cent year-on-year in December, and core inflation seen at 5.4 per cent.
"If we see core inflation below 5 per cent, we'll see the dollar sell off in a flash," said Giles Coghlan, chief currency analyst at HYCM.
Sterling touched a two-month top of $1.3645 in Asia, as investors see Britain overcoming a wave of COVID-19 cases led by the Omicron variant and have priced in a nearly 80 per cent chance of a Bank of England rate hike in February.
Benchmark 10-year Treasury yields were steady at 1.7446 per cent and have pulled back nearly seven basis points from an almost two-year high hit on Monday.
Germany's 10-year yield was little changed at -0.03 per cent after rising as high as -0.014 per cent on Tuesday, nearing positive territory for the first time since May 2019.
MSCI's broadest index of Asia-Pacific shares outside Japan soared 1.5 per cent to a one-and-a-half month high, led by a 5 per cent jump for tech stocks in Hong Kong.
Japan's Nikkei rose 1.9 per cent.
In China, a softer than expected reading on prices has drawn bets on policy easing.
Five-year Chinese government bond futures rose eight ticks to an 18-month high before trimming gains. Yuan gains were also capped.
Safe-haven gold fell 0.34 per cent to $1,816 an ounce, though it is hemmed in a range it has kept for half a year.
Cryptocurrencies were steady with investors comforted that bitcoin's support at $40,000 held this week. Bitcoin was trading at $42,681.