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Asia shares rise, helped by China optimism

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Gold perched near record high

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Worries over Trump tariffs ebb

(Updates to Asia afternoon)

By Rae Wee

SINGAPORE, Feb 21 (Reuters) - Asian shares surged to a

three-month peak on Friday as buyers returned to previously

unloved Chinese stocks thanks to optimism over artificial

intelligence, while the U.S. exceptionalism narrative continued

to lose its shine.

Gold hovered near a record high and was set to extend

its gains for an eighth consecutive week. The precious metal was

helped by safe-haven flows due to concerns over Donald Trump's

tariff threats and amid contentious talks as the U.S. president

pushes for a quick deal to end the Russia-Ukraine war.

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

jumped more than 1% to its highest since

November 8 on Friday, putting the index on track for a sixth

straight week of gains - the longest such winning streak in over

two years.

The move came as a result of a surge in Hong Kong- and

China-listed stocks, which saw the Hang Seng Index scale

a three-year peak and push the CSI300 index 1% higher.

Hong Kong's tech shares advanced 4.7%, while the

Shanghai Composite Index rose 0.7%.

Chinese stocks have been on a tear in recent days, driven by

DeepSeek's AI breakthrough that reignited investor interest in

China's technology capabilities.

While the Hang Seng Tech Index has gained nearly 30% for the

year thus far, the S&P 500 is up just 4% over the same

period.

"DeepSeek has been a catalyst for sentiment changing," said

Brian Arcese, portfolio manager at Foord Asset Management.

Earlier this week, Chinese President Xi Jinping held a rare

meeting with some of the biggest names in China's technology

sector, urging them to "show their talent" and be confident in

the power of China's model and market.

"I think that is a shift in China. These things are done for

a reason, nothing's really coming out of the meeting other than

the fact that we're showing that we've met... but that is a big

signal, you don't do that lightly," said Arcese.

In contrast, markets in Europe and the U.S. looked set to

open on a dour note, with EUROSTOXX 50 futures falling

0.11% and FTSE futures easing 0.08%.

Nasdaq futures lost 0.07%, while S&P 500 futures

shed 0.09%.

DeepSeek's breakthrough has not only had investors turning

their attention back to China, but also second-guessing crowded

positions in mega-cap U.S. technology stocks currently trading

at much higher valuations than their Chinese peers.

Also souring U.S. sentiment, Thursday's downbeat forecast

from Walmart ( WMT ), the world's largest retailer, stoked

concerns about the outlook for the world's largest economy.

"The footing that the U.S. economy was thought to be on is

starting to show a few little cracks, in terms of the

exceptionalism of the AI and technology aspect... you're seeing

some cracks in the growth narrative that the U.S. economy is

just so much better than the rest of the world," said Tony

Sycamore, a market analyst at IG.

Elsewhere, Japan's Nikkei edged up 0.17%.

DOLLAR EASES

While the threat of further import duties from Trump

continued to cast a pall over markets, traders are also sobering

up to the fact that the start of his second term has been mostly

bluster on the tariff front.

The dollar was headed for a third straight weekly

loss, as bulls who had built up big long positions in

anticipation of a trade war have backed off while Trump

equivocates about tariffs.

Several Federal Reserve officials on Thursday said they are

taking note of what they see as rising inflation risks and the

uncertain impact of Trump's trade, immigration and other

policies.

The weaker dollar left sterling at a two-month high

of $1.2674, while the euro steadied at $1.0493 ahead

of a weekend election in Germany.

The yen, meanwhile, fell 0.5% to 150.35 per

dollar, as comments from Bank of Japan Governor Kazuo Ueda eased

concerns that the central bank may be considering a more

aggressive rate hike stance.

Data on Friday showed Japan's core consumer inflation hit

3.2% in January, its fastest pace in 19 months.

"The data supports the growing market conviction of a BOJ

rate hike by July, and a possible third hike by year-end," said

Alvin Tan, head of Asia FX strategy at RBC Capital Markets.

In commodities, oil prices dipped but were headed for a

weekly gain.

Brent crude oil futures eased 0.21% to $76.32 a

barrel, but were set to rise more than 2% for the week. U.S.

West Texas Intermediate crude fell 0.22% to $72.32, but

was also on track for a weekly gain of over 2%.