By Xie Yu

HONG KONG (Reuters) – Asian shares bounced up on Tuesday after a late revival on Wall Street, though global growth fears stoked by China’s strict COVID-19 curbs and an expected streak of aggressive Federal Reserve tightening sapped risk appetite.

By 0450 GMT, MSCI’s broadest index of Asia-Pacific shares outside Japan ticked up 1.1%, helped by China’s blue chip index adding 1.4%, after its worst day in two years on Monday. Hong Kong’s benchmark Hang Seng Index bounced 1.9%.

The tech sector rallied 5.3%, boosted by mega firms such as Tencent Holdings and Alibaba Group. News that Elon Musk, the world’s richest man, had clinched a deal to buy Twitter for $44 billion cash also underpinned sentiment.

The nervousness about China’s economic slowdown, however, hit Australian shares, with the local benchmark down 2% by early afternoon, hurt particularly by declines in miners.

Japan’s Nikkei stock index pared earlier gains and was down 0.04% by early afternoon. U.S. stock futures were little changed in Asia trade.

The lockdown in Shanghai, and the spread of cases in other big cities like Beijing, is weighing on the growth outlook for the world’s No.2 economy and investment sentiment, said Manishi Raychaudhuri, Asia-Pacific equity strategist at BNP Paribas.

“If the lockdown situation persists for longer”, it will impact China’s economy significantly and “also have an impact on the supply chains across the world”, he said.

Markets have also been fretting that an aggressive pace of tightening by the U.S. Fed could derail the global economy, which has only just started to recover from the pandemic.

The Fed is expected to raise rates by a half a percentage point at each of its next two meetings. [FEDWATCH]

Lockdown in China’s financial hub has dragged into a fourth week, as authorities stick to their “dynamic zero-COVID” policy to combat the latest outbreak of Omicron cases.

In early European trade, the pan-region Euro Stoxx 50 futures added 1.6% to 3,744. German DAX futures went up 1.51% to 14,153, while FTSE futures rose 1.07% to 7,445.5.

In currency markets, the dollar was in fine fettle on safe-haven demand. China’s offshore yuan was steadier, at 6.5558 per dollar after the People’s Bank of China said late on Monday it would cut the amount of foreign exchange banks must hold as reserves.

That helped it recover from a year-low of 6.609 per dollar on Monday, hurt by fears about China’s economic growth.

The dollar was higher against most peers, with its index against a basket of rivals at 101.58, just off its overnight two year peak.

Benchmark U.S. 10-year yields ticked up to 2.8566% in early afternoon deals. Treasury yields retreated on Monday from hawkish Fed-induced highs, as the China lockdown and growth fears sent investors to the safety of U.S. bonds.

The same worries jolted the oil market on Monday, with prices dropping by 4%. On Tuesday, U.S. crude added 0.89% to $99.42 a barrel, while Brent rose more than a percent to $103.53 per barrel. [O/R]

Spot gold added 0.28% to $1,902.96 an ounce. [GOL/]

(Reporting by Xie Yu; Editing by Shri Navaratnam and Himani Sarkar)