Portugal Colonial - Markets rally as traders brace for US inflation data

Oil prices also enjoyed a small bounce on demand optimism after two days of losses fuelled by the positive vibes from Eastern Europe and as talks on an Iran nuclear deal appear to be progressing.

With speculation swirling over the Federal Reserve's plans to battle soaring prices, global equities have fluctuated wildly at the start of the year as traders try to position themselves for a series of interest rate hikes that are likely to begin in March.

The prospect of the removal of cheap cash -- which has pushed markets to record or multi-year highs -- has particularly hit tech firms as they are more susceptible to higher rates.

However, the sector helped New York's three main indexes to healthy gains on Tuesday, and Asia followed suit in early trade Wednesday.

Hong Kong led the way, jumping more than two percent thanks to a 6.8 percent surge in market heavyweight Alibaba after Japan's SoftBank allayed fears it was planning to offload some of its huge holdings in the e-commerce giant.

Alibaba had taken a hit earlier on speculation about the share sale, which compounded the Chinese firm's woes after suffering hefty losses owing to Beijing's crackdown on the tech sector.

Tokyo, Sydney, Taipei and Bangkok were all up more than one percent, while Shanghai, Seoul, Singapore, Wellington, Mumbai, Manila and Jakarta also rallied.

London, Paris and Frankfurt all rose at the open.

Still, investors remain nervous and Thursday's US January inflation print is front and centre this week.

Forecasts are for another pop up from the four-decade-high seven percent seen in December, while a big miss in either direction could have big consequences for markets.

A higher reading will pile pressure on the Fed to embark on a more aggressive tightening campaign but a weaker figure would temper worries.

"The inflation data has continued to rise faster than many anticipated and we're now in a situation where central banks are racing to catch up and get to grips with price pressures," said OANDA's Craig Erlam.

"Many still expect we'll see an orderly return to inflation targets over the forecast horizon with moderate rate increases but the risk of inaction becomes far greater than the alternative."

He added: "The next 48 hours will be interesting, with the Fed minutes (from its most recent meeting) and US inflation data being released. So much has been priced in at this point -- five hikes from the Fed by December -- but there's potential for more.

"We may not yet have hit the peak as far as rate expectations are concerned and Thursday's (consumer prices) reading is expected to be another shocker."

Signs of a possible easing of tensions on the Russia-Ukraine border also provided a little pep to investors.

After speaking to Russia's Vladimir Putin, French President Emmanuel Macron said he saw the "possibility" for talks between Moscow and Kyiv over the festering conflict in eastern Ukraine to move forward, and "concrete, practical solutions" to lower tensions.

But hopes for a breakthrough have weighed on the oil market in recent days, as have indications that an agreement with Iran on its nuclear programme was close.

A deal with Tehran would pave the way for it to begin selling crude on the international market again, pushing much-needed supplies into a tight market.

Still, with demand expected to continue rising as the global economy reopens, commentators predict the black gold will break past $100 a barrel soon.

After falling more than two percent Tuesday, both main contracts extended losses in Asia.

- Key figures around 0820 GMT -

Tokyo - Nikkei 225: UP 1.1 percent at 27,579.87 (close)

Hong Kong - Hang Seng Index: UP 2.1 percent at 24,829.99 (close)

Shanghai - Composite: UP 0.8 percent at 3,479.95 (close)

London - FTSE 100: UP 0.6 percent at 7,614.51

Euro/dollar: DOWN at $1.1412 from $1.1426 late Tuesday

Pound/dollar: UP at $1.3550 from $1.3545

Euro/pound: DOWN at 84.23 pence from 84.27 pence

Dollar/yen: DOWN at 115.40 from 115.53 yen

West Texas Intermediate: DOWN 0.6 percent at $88.84 per barrel

Brent North Sea crude: DOWN 0.6 percent at $90.27 per barrel

New York - Dow: UP 1.1 percent at 35,462.78 (close)

A.S.Diogo--PC