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Asian shares edged higher on Wednesday as investors clung to hopes that the pace of U.S. and global rate hikes will start to slow, though U.S. futures dropped after disappointing results from tech giants Alphabet and Microsoft.

E-mini futures for the S&P 500 fell 1% in early trade after Google-owner Alphabet posted softer-than-expected ad sales after the bell and Microsoft missed expected revenue forecasts, possible early signs of a slowdown in the U.S. economy.

Meanwhile, MSCI's broadest index of Asia-Pacific shares outside Japan was up 1%, led by a bounce in Hong Kong, while Japan's Nikkei rose 1.1% by mid-morning.

The mainland Chinese benchmark index advanced 1%, while Hong Kong stocks rose 2%, attempting another rebound after Monday's deep sell-off in Chinese assets by global investors worried about Beijing's policy direction.

Xi Jinping's new leadership team has raised worries that a more powerful Party leadership will increasingly prioritise the state at the cost of the private sector, and keep tough zero-COVID policies in place well into next year.

U.S. economic data on Tuesday showed slowing home price growth and souring consumer confidence, with some signs that the Federal Reserve's aggressive interest rate hikes are starting to cool the labour market.

"Continuing the theme of bad (economic) news is good news (for risk markets), U.S. equities are continuing to bask in the afterglow of last Friday’s hints of a step-down in the pace of Fed tightening," Ray Attrill, head of FX strategy at National Australia Bank in Sydney, said in a note.

Traders and economists predict another 75 basis point (bps) increase from the Fed next Wednesday, but the view is growing for a slowing to half a point in December.

Treasuries rallied sharply overnight, with the yield on benchmark 10-year U.S. government debt down more than 12 bps. It was steady at 4.0937% on Wednesday. [US/]

In Australia, inflation raced to a 32-year high last quarter as the cost of home building and gas surged. The surprise added pressure on the central bank to reverse a recent dovish turn, though markets doubt there will be a dramatic shift.

Support for the Aussie dollar was small and fleeting, leaving it more or less steady at $0.6386. Three-year Australian government bond futures were knocked from peaks but managed to hold steady for the day at 96.400. [AUD/]

In currency markets, the dollar flirted with a three-week low versus major peers, while sterling hung close to the six-week peak reached on Tuesday after new British Prime Minister Rishi Sunak pledged to lead the country out of an economic crisis.

The pound was last trading at $1.1445, down 0.19% on the day, but not far from Tuesday's high of $1.1500, a level last seen on Sept. 15.

The Japanese yen weakened 0.30% versus the greenback at 148.39 per dollar. The beaten-down currency had touched a 32-year low at 151.94 on Friday, but retreated after two bouts of suspected Bank of Japan intervention either side of the weekend.

Japanese government bonds rallied sharply after the Bank of Japan again said it would increase bond buying operations. [JP/]

Oil prices fell as industry data showed U.S. crude oil stockpiles rose more than expected, reinforcing fears of a global recession that would cut demand.

Brent crude futures for December dropped $1.17, or 1.3%, to $92.35 a barrel at 0111 GMT, after climbing 26 cents in the previous session. U.S. West Texas Intermediate (WTI) crude futures for December delivery were down 88 cents, or 1%, to $84.44 a barrel.