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China sets firm fix for yuan, soothing devaluation worry

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Wall St futures dip after Alphabet earnings disappoint

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Dollar backs off highs, Treasury yields ease

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Gold hits new peak amid trade tensions

By Wayne Cole

SYDNEY, Feb 5 (Reuters) - Asian stock markets tried to

steady on Wednesday amid hopes U.S. tariffs would not be as

painful for the global economy as feared just a day ago, though

Wall Street futures took a knock from a sharp drop in Alphabet

shares as earnings disappointed.

Investors were also not entirely sure what to make of

comments by President Donald Trump that the U.S. would like to

take over the war-ravaged Gaza Strip and develop it

economically.

The dollar surrendered some of its recent gains as investors

saw a little more scope for the Federal Reserve to ease policy

this year, sparking a rally in Treasuries.

The mood was helped by Beijing's relatively restrained

response to President Donald Trump's added 10% in tariffs, which

covered just $14 billion of U.S. imports.

"The measures are fairly modest, at least relative to U.S.

moves, and have clearly been calibrated to try to send a message

to the U.S. without inflicting too much damage," said Julian

Evans-Pritchard, head of China economics at Capital Economics.

"The risk is that China's retaliation proves too modest to

exert any real pressure on the U.S. to reverse tariffs, but

sufficiently defiant to trigger a further escalation."

Beijing supported sentiment on Wednesday by setting a firm

fix for its yuan, countering concerns it might allow the

currency to slide to offset the impact of tariffs on its

exports. That saw Chinese blue chips return from

holiday with a rise of 0.7%.

While many uncertainties remained, including Trump's threats

of levies on Europe, markets seemed relieved things were not

even worse.

MSCI's broadest index of Asia-Pacific shares outside Japan

added 0.8%, while Japan's Nikkei edged

up 0.3%. South Korea's main index bounced 1.2%.

EUROSTOXX 50 futures, FTSE futures and DAX

futures were all down around 0.1% amid the lingering

risk of U.S. taxes on trade.

Having bounced on Tuesday, Wall Street futures ran into

selling when Alphabet earnings missed forecasts and its shares

dived 7.7%, wiping $195 billion off its market capitalisation.

S&P 500 futures dipped 0.2% and Nasdaq futures

lost 0.3% in response. Results out Wednesday include Uber, Ford,

Qualcomm and Walt Disney.

The delays to tariffs on Canada and Mexico eased worries the

Fed might be severely restricted in how far it could cut

interest rates and prompted a bounce in fund futures.

Yields on two-year Treasuries were back at 4.226%

and off a peak of 4.282% hit on Monday.

The pullback in yields coincided with a retreat in the

dollar from its peaks, with the dollar index down at

108.060 from Monday's spike top of 109.880.

The euro firmed to $1.0384, a remarkable round

trip from the two-year trough of $1.0125 struck at the start of

the week. Likewise, the dollar had recoiled to 1.4327 Canadian

dollars from a 22-year high of 1.4792.

The dollar also slipped 0.5% on the Japanese yen to touch a

seven-week low at 153.49, breaking support at 153.72.

In commodity markets, gold hit a fresh all-time high at

$2,848 an ounce aided in part by the pullback in the

dollar and yields.

Oil prices were initially hit by news of China's tariffs on

its imports of U.S. oil, only to come off lows on reports Trump

had restored his "maximum pressure" campaign on Iran, in a bid

to drive Iranian oil exports to zero.

Brent rose 5 cents to $725 a barrel, while U.S.

crude added 17 cents to $72.87 per barrel.