SYDNEY (BLOOMBERG) Asian equities posted modest gains Friday (Jan 11) and were on course for the strongest week since early November, bolstered by continued signs of flexibility from the Federal Reserve and optimism over US-China trade negotiations. The yuan held near its strongest since July.

Shares in Tokyo led the region, with trading in Hong Kong, South Korea and Australia mostly flat. The S&P 500 earlier extended its rally since Christmas Eve past 10 per cent, though gains were limited as retailers sank amid concerns about a sales slowdown. Fed chairman Jerome Powell underscored the message of patience with further interest-rate hikes, while saying the central bank will keep shrinking its balance sheet to a more normal level - a remark that sparked an intraday slide in stocks. Later, vice-chair Richard Clarida said any sustained headwinds to the US economy should be offset by policy.

Equities are rallying around the world as signs of progress between the world's two biggest economies and dovish commentary from the Fed help lift sentiment that took a battering late in 2018. Still, worries remain about economic growth and earnings prospects.

"Markets are ultimately waiting to see if Fed's new rhetoric related to stepping back, does it translate to action, and does the Fed actually pause at some point," Dan Skelly, head of equity model portfolio solutions at Morgan Stanley, told Bloomberg TV in New York. "That's really what we are waiting for to see a sustained move higher" in stocks, he said.

Elsewhere, oil remained above US$52 a barrel despite slipping in early Friday trading. It's up about 9 per cent this week.

These are the main moves in markets:

Stocks

The MSCI Asia Pacific Index advanced 0.2 per cent as of 9.30am in Hong Kong.

Japan's Topix index rose 0.5 per cent.

Australia's S&P/ASX 200 Index added 0.1 per cent.

Hang Seng rose 0.1 per cent.

Futures on the S&P 500 Index were flat. The S&P 500 rose 0.5 per cent Thursday.

Futures on the Euro Stoxx 50 gained 0.2 per cent.

Currencies

The yen was steady at 108.38 per dollar.

The offshore yuan was steady at 6.7930 per dollar.

The Bloomberg Dollar Spot Index slid 0.1 per cent.

The euro added 0.2 per cent to US$1.1521.

Bonds

The yield on 10-year Treasuries dipped one basis point to 2.73 per cent.

Australia's 10-year bond yield added one basis point to 2.33 per cent.

Commodities

The Bloomberg Commodity Index dropped 0.5 per cent on Thursday.

West Texas Intermediate crude fell 0.8 per cent to US$52.16 a barrel after entering a bull market on Wednesday.

Gold rose 0.1 per cent to US$1,288.24 an ounce.