MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.9 percent, while shares in China nudged up 0.1 percent. Australian stocks gained two percent for the biggest intraday gain since July 21. Tokyo shares also jumped by more than one percent, Reuters reported.

Oil futures gave up their overnight gains and fell in Asia due to nagging worries about an increase in the supply of crude. US stock futures ESc1 were 0.02 percent higher in Asia.

An industry gauge released overnight indicated US manufacturing activity expanded in July at the fastest pace in more than a year, which helped Wall Street shares rise.

However, some investors remain cautious due to worries about a resurgence of the coronavirus and a diplomatic tussle over Chinese tech companies’ operations in the United States.

“It has been an upbeat US trading session and Asia will absorb the leads accordingly,” Chris Weston, head of research at Pepperstone, said in a market note.

The Dow Jones Industrial Average rose 0.89 percent, the S&P 500 gained 0.72 percent, and the Nasdaq Composite advanced 1.47 percent to set a record closing high as investors cheered the manufacturing data.

That data also caused the US Treasury curve to steepen, an indication of improved investor sentiment.

US stocks received an additional lift from Microsoft, which jumped 5.6 percent after it formally declared interest in buying the US operations of TikTok, a popular video-sharing app owned by Chinese tech company ByteDance. US President Donald Trump has threatened to ban TikTok unless its US operations are sold off from ByteDance.

Washington is also preparing to take action against other Chinese software companies that could share user data with Beijing, setting the stage for further conflict.

The dollar held steady against its counterparts as traders awaited progress in negotiations for additional economic stimulus.

Chicago Federal Reserve Bank President Charles Evans called forcefully for more US government spending to support the economy, saying “demand trouble is brewing” as existing relief policies expire.

Spot gold XAU was down 0.09 percent on Tuesday but still near a record high of $1,984.66 set on Monday amid support from virus fears.

US crude CLc1 dipped 0.61 percent to $40.76 a barrel, while Brent crude LCOc1 fell 0.59 percent to $43.89 per barrel due worries about extra supply coming to market.

Russia has started to increase oil and gas output. Other oil producers are also expected to increase output this month after OPEC and its allies agreed to ease production curbs.

South Korea warned of a second wave of the new coronavirus as infections rebounded to a one-month high, while new infections accelerated in Germany, theedgemarkets.com reported.

Yet millions of French people are set to cautiously emerge from one of Europe’s strictest lockdowns on Monday, as countries across Europe ease restrictions.

Investors seemed determined to stay optimistic and MSCI’s broadest index of Asia-Pacific shares outside Japan firmed 1.1 percent.

Japan’s Nikkei added 1.6 percent and Chinese blue chips 0.7 percent. E-Mini futures for the S&P 500 ESc1 opened soft but bounced as the morning wore on and was last up 0.5 percent.

EURO STOXX 50 futures gained 0.8 percent and FTSE futures 0.7 percent.

Wall Street had rallied on Friday after the April payrolls report proved dire but not quite as awful as analysts’ worst fears.

“Just getting the worst jobs to report in history out, is at the margins helpful for risky assets,” said Alan Ruskin, head of G10 FX at Deutsche Bank.

“Since late March there has been an extraordinary divergence between the real economy and financial risk, with the latter helped by unprecedented policy accommodation,” he added.

“Markets know the real economy data is awful. We are less sure of how long markets aided by policy, can defy the real economy if the growth improvement is slow.”

The bond market certainly seems to think any recovery will be slow with two-year yields hitting record lows at 0.105 percent and Fed fund futures turning negative for the first time ever.

The rally in prices has come even as the US Treasury plans to borrow trillions of dollars in the next few months to plug a gaping budget deficit.

Federal Reserve Chair Jerome Powell is due to give a keynote speech on Wednesday and analysts suspect he will rule out taking rates negative, at least for now.

The decline in US yields might have been a burden for the dollar but with rates everywhere near or less than zero, major currencies have been stuck in tight ranges.

The dollar was a shade firmer on the yen at 106.94 on Monday but well within the 105.97 to 109.37 band that has lasted since late March. The euro was a fraction softer at $1.0830 but above last week’s low at $1.0765.

In commodity markets, gold edged up 0.5 percent to $1,708 an ounce.

Oil prices opened about one percent lower as a persistent glut weighed on prices and the coronavirus pandemic eroded global oil demand, even as some governments began to ease lockdowns.

Brent crude LCOc1 futures lost 54 cents to $30.43 a barrel, while US crude CLc1 fell 53 cents to $24.21.