GLOBAL MARKETS: Asian shares scale six-week peak on hopes for US-Iran peace talks

Asian stocks tracked Wall Street higher on Wednesday as hopes for a resumption of U.S.-Iran peace talks capped oil prices at under $100 a barrel, while the dollar steadied after seven days of losses.

But European markets were bracing for a more muted open, with pan-region futures STXEc1 down 0.2%, and FTSE futures FFIc1 little changed. Wall Street futures were flat after a strong rally on Tuesday.

President Donald Trump said talks with Iran could resume in Pakistan over the next two days, after the collapse of weekend negotiations prompted Washington to impose a blockade on Iranian ports. Pakistani and Iranian officials also said negotiations could restart.

Signs that diplomatic engagement would continue helped calm markets. Brent crude futures LCOc1 bounced 1% to $95.77 a barrel, having slumped almost 5% overnight to trade below $100.

Stock investors cheered, with MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS gaining 1.5% to hit the highest level in six weeks. Japan's Nikkei .N225 climbed 0.9%% while South Korea's KOSPI .KS11 rallied 3%.

Chinese blue-chips .CSI300 rose 0.2% and Hong Kong's Hang Seng index .HSI gained 0.7%.

"It seems fairly clear at this stage that neither side is seeking to escalate the situation further, from a kinetic perspective, with it also increasingly obvious that the U.S. blockade of the Strait of Hormuz is a negotiating gambit," said Michael Brown, senior research strategist at global online broker Pepperstone.

"That 'direction of travel' remains, by and large, towards some sort of US-Iran peace deal being done."

Overnight on Wall Street, the Nasdaq climbed 2% to chalk up its 10th straight day of gains and the S&P 500 flirted with a record closing high. U.S. producer inflation data also provided some encouragement as prices rose by less than economists expected in March, helping temper fears around war-driven inflation.

Investor optimism that the Iran war may wind down soon also supported Treasuries, which have taken a beating recently on inflation worries.

The two-year U.S. Treasury yield US2YT=RR slipped 1 basis point (bp) to 3.746% on Wednesday, having fallen 3 bps overnight. The 10-year yield US10YT=RR was also down 1 bp at 4.2439%, after dropping 4 bps overnight.

The safe-haven U.S. dollar =USD stabilised after falling for a seventh straight session overnight. The euro EUR=EBS held steady at $1.1791, having hit a six-week top of $1.1811 overnight.

Gold prices XAU=slipped 0.3% to $4,824 an ounce.

With the flow of oil still effectively cut off through the Strait of Hormuz, the International Monetary Fund on Tuesday lowered its growth outlook and warned that the global economy would teeter on the brink of recession if the conflict worsens.

-Stella Qiu/Reuters