Asian markets rallied Wednesday, building on a hearty performance on Wall Street and helped by the reopening in China, though analysts continue to warn of near-term volatility caused by surging inflation, rising interest rates and the Ukraine war. Equities have enjoyed some respite in recent weeks from a painful sell-off caused by central bank monetary tightening — particularly by the Federal Reserve — and a spike in prices that is beginning to hit consumers, raising concerns of an economic slowdown or recession. A retreat in US Treasury yields provided a lift to New York traders, as did a jump in Chinese firms listed there fuelled by growing optimism that Beijing is to ease back on its long-running crackdown against the tech sector. The improved mood around tech has come after a report this week said China was close to ending a probe into ride-hailing app Didi Global and restoring its main apps this week. The Wall Street Journal also said investigations into two other firms — Full Truck Alliance and recruitment platform Kanzhun — were coming to a conclusion. And on Tuesday authorities approved a second batch of 60 games in a further step to lightening their approach in the world’s largest mobile entertainment market. Citi analysts said the “announcement will also send a positive signal of policy support to the overall China internet sector”. Market heavyweights rallied in Hong Kong with Alibaba up more than 6pc, Netease 4pc higher and Tencent up more than 3pc, helping the Hang Seng Index climb more than 1pc. Shanghai, Tokyo, Sydney, Seoul, Wellington, Taipei and Manila were also well in positive territory. The moves come as Beijing relaxes its strict Covid lockdown measures, allowing the world’s number two economy to edge back into life after months. “The bounce in risk sentiment is due to a more positive China tilt where the outlook is set to brighten up as Covid restrictions ease, and state-owned banks are obliged to increase lending again,” said SPI Asset Management’s Stephen Innes. “It certainly feels like the tide is turning on the mainland, though the overall tone still leans more cautiously optimistic, with key emphasis on ‘cautiously’.” All eyes are on the release Friday of US inflation data for a better idea about the Fed’s plans as it hikes borrowing costs. Officials are expected to lift rates half a point each in June and July with some commentators warning a strong report on Friday could allow them to unveil a three-quarter-point move in September. Such a move would push the dollar up even further against its peers, with the unit at a 20-year high against the yen. And observers said that the uncertainty would continue to cause volatility on markets. “The reality for the economy and probably the stock markets are that aggressive central bank rate hikes are likely to take a sharp bite out of household consumption as costs of living pressures come from goods and services, depressed real wage gains and markedly higher mortgage servicing,” Innes added. “Hence, the central bank’s endgame is to cool inflation by slowing the economy and tightening financial conditions at stock market investors’ expense until price pressures abate.” And Kate Moore at BlackRock explained to Bloomberg Television that “figuring out the direction over the next couple of months becomes increasingly difficult”. “There seems to be across all of the investing segments a lack of strong conviction in the direction of the market. We are going to see a lot more investors remain on the sidelines, remain cautiously positioned.”