By Anshuman Daga

SINGAPORE (Reuters) – Global shares extended their recovery on Tuesday, with Asian markets bouncing from four-weeks lows as investor focus on economic growth partly offset worries about any near-term rise in U.S. interest rates.

The early momentum in the region was supported by a rally on Wall Street, with the Dow registering its strongest session in more than three months.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.35%, moving above Monday’s four-week lows and notching a 4% gain so far this year.

Japanese shares led the way, with the Nikkei advancing 2.1%. South Korea stocks rose 0.4%, Australia was up 1.2% and Chinese stocks advanced 0.6%

Last week’s surprise hawkish shift by the U.S. Federal Reserve sent global stock markets skidding as traders brought forward expectations for interest rate increases.

The Fed’s pivot toward starting policy normalisation discussions was driven by rapidly rising inflation, a dynamic that has kept financial markets on edge in the past few months.

“We view the meeting as an initial step of a shift in Fed rhetoric as the central bank continues to catch up with stronger than expected growth and inflation indicators, and the Fed’s inflation forecasts remain well below our projections,” JPMorgan strategists said in a note.

On Monday, Fed officials including as St. Louis Fed President James Bullard and Dallas Fed President Robert Kaplan toned down their hawkish rhetoric.

Overnight, Wall Street was led higher by shares of banks and energy firms. The Dow Jones Industrial Average rose 1.76% the S&P 500 gained 1.40% and the Nasdaq Composite added 0.79%.

“Market direction ahead will depend on how much further we have to go in terms of the peak in economic activity and how much of the temporary bounce in growth and inflation will become structural,” Amundi Asset Management said in its investment outlook for the second half.

“Currently, there is growing evidence that companies are passing on price pressures and that consumers are continuing to buy as the economy fully reopens.”

Investors are keenly focused on the U.S. labour market as its performance is likely to have an influence on the Fed’s policy stance. In the immediate hours ahead, all eyes are on Fed chief Jerome Powell who appears before Congress from 1800 GMT.

In currency markets, the dollar paused for breath after gaining sharply in the wake of the Fed’s policy surprise.

Against the euro, the dollar nursed overnight losses of about 0.4% to steady around $1.1905. It held at 110.26 yen, and the dollar index was little changed at 91.96 after giving up about 0.5% on Monday.

Bitcoin and other cryptocurrencies had come in for heavy selling on Monday, hurt by a tightening crackdown on trading and mining in China, as well as technical factors.

Bitcoin stabilised in Asian trading and was last up 3.2% to 32,660.

Treasuries Benchmark 10-year notes were last up slightly to yield 1.4768%.

U.S. crude held largely steady at $74.98 per barrel and Brent eased to $73.6, after they rose on Monday on a pause in talks to end U.S. sanctions on Iranian crude. Market sentiment also strong on hopes for a quick recovery in oil demand in the U.S. and European markets.

Spot gold was little changed at $1,784.23 an ounce.

(Reporting by Anshuman Daga; Editing by Shri Navaratnam)