LONDON/HONG KONG – Asian shares led a global rally on Tuesday, but concerns about rising prices worldwide set a nervy tone in markets as investors wait for more signals from policymakers.

European shares followed the positive start in Asia, with the STOXX index of Europe's 600 biggest stocks up 0.62 percent and US stock futures, S&P 500 e-minis , suggesting Wall Street would follow suit.

MSCI's broadest index of Asia-Pacific shares outside Japan gained 1.5 percent on Tuesday, but the index is still down 6.4 percent so far this month.

"There was a good session in Asia and, taking the S&P 500 as a guide, the US looks set to be up around 1 percent…but looking ahead markets remain fixated on inflation and rate hikes," said Philip Shaw, Chief Economist at Investec in London.

"Headlines are focused on higher inflation pressures either directly stemming from the Ukraine conflict," he said.

Hopes that the latter might ease had set the positive mood in shares early on Tuesday.

Shanghai achieved the long-awaited milestone of three straight days with no new COVID-19 cases outside quarantine zones, which could lead to the beginning of the lifting of restrictions. 

In Tokyo, the Nikkei rose 0.33 percent in afternoon trade, while in Australia the S&P/ASX200 index gained 0.25 percent.

Growth fears

Despite the mild recovery in stocks, however, there were nervy signs elsewhere as economic growth fears in the world's two largest economies have re-emerged following disappointing US manufacturing data.

The New York Fed's Empire State manufacturing index published on Monday showed an abrupt fall during May and shipments fell at their fastest pace since the beginning of the pandemic. 

The yield on benchmark 10-year Treasury notes rose to 2.9203 percent compared with its Monday US close of 2.879 percent, while two-year yields , which rise with traders' expectations of higher Fed fund rates, edged up to 2.6153 percent.

Investors will look to a slew of central bank policymakers speaking on Tuesday for further signs of the timing of rate hikes to combat inflation.

Those slated to speak include US Federal Reserve chair Jerome Powell at 1800 GMT, European Central Bank President Christine Lagarde, and Bank of England Deputy Governor Jon Cunliffe.

Futures markets are pricing consecutive 50 basis point hikes in June and July and for the benchmark US interest rate to reach 2.75 percent by year end. However there are growing expectations that other central banks will catch up.

The US dollar index , which tracks the greenback against a basket of currencies, fell 0.23 percent to 103.9 as investors cashed out and trimmed bets on US rate hikes driving further gains. read more

The European single currency was up 0.3 percent on the day at $1.046, having lost 0.96 percent in a month.

Investors likewise took profits from a recent rally in oil, sending prices lower on Tuesday after Hungary resisted a European Union push for a ban on Russian oil imports, a move that would tighten global supply.

US crude dipped 0.36 percent to $113.79 a barrel. Brent crude fell to $114.12.

Gold prices firmed, as the pullback in the dollar supported demand for greenback-priced bullion and countered pressure from the recovery in US Treasury yields. Spot gold traded up 0.1 percent at $1,825.44 per ounce.