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 Asian stocks rose in a choppy session on Thursday as a bit of nervous tension over Nancy Pelosi's visit to Taiwan dissipated and as investors took cues from robust U.S. data and earnings.

Hong Kong tech shares led the attempted rebound with a gain of 2.8%, reeling in some of the losses suffered as Sino-U.S. frictions flared over a visit to Taipei this week by House of Representatives Speaker Pelosi, which angered China. [.HK]

The Hang Seng rose 1.7%. Japan's Nikkei rose 0.7%. MSCI's broadest index of Asia-Pacific shares gained 0.5% and crude prices steadied after sliding on news of slackening demand and higher supply.

S&P 500 futures were down 0.1% in the Asian afternoon. European futures rose 0.3% and FTSE futures were flat as expectations for the steepest Bank of England rate hike in 27 years loomed over the market mood.

A 50 basis point (bps) hike is all but priced in, so sterling may struggle in the absence of a hawkish surprise -- especially as the British economic outlook is looking weak while U.S. data has offered some upside surprises.

Sterling was steady at $1.2157.

An ISM survey on Wednesday showed the U.S. services industry unexpectedly picked up in July, prompting a selloff in bonds and rallies for U.S. stocks and the dollar, with the Nasdaq up 2.5% to a three-month high.

"The rally had a goldilocks-type feel to it," said NatWest Markets' head of G10 foreign exchange strategy, Brian Daingerfield.

"Wider risk markets seemed eager to embrace the growth signal delivered by the ISM reading, while (being) relatively less perturbed by the tightening in financial conditions the data support."

Fed officials have provided a hawkish chorus this week, battering the short end of the yield curve. Two-year Treasury yields were at 3.0815% in Asia and are up 18 bps this week. Benchmark 10-year year yields held at 2.7191%.

TENSIONS

Currency markets have also hit an air pocket as uncertainty swirls around the outlook for growth and rates. The dollar has halted a decline that began in the middle of July, with support from both hike expectations and heightened political tension. [FRX/]

Fed funds futures remain priced for rate cuts to be under way by the middle of next year and the inversion of the U.S. yield curve, with 10-year yields below two-year yields, suggests investors think that the hiking path will hurt growth.

"I think the market's going to remain choppy," said David Ratliff, head of banking and capital markets for Asia Pacific at Wells Fargo in Hong Kong. "People are starting to read through the current round and pace of Fed tightening."

The dollar index was steady at 106.390. A euro weighed by Europe's energy crisis bought $1.0165. The Australian dollar enjoyed a small fillip from a record Australian trade surplus and rose 0.2% to $0.6968.

Sabre rattling in the Taiwan Strait took a little bit of a back seat in the Asia session, but bumpy trade in Chinese markets was evidence investors see plenty of risks remaining. [.SS]

China launched unprecedented live-fire military drills in six areas that ring Taiwan, a day after Pelosi's visit.

Brent crude futures were flat at $96.81 a barrel.

Spot gold rose 0.4% to $1,771 an ounce.

Earnings from Alibaba Credit Agricole, Lufthansa [LHAG.DE] and Bayer are due later in the day.