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Asian shares rose on Wednesday on optimism that Chinese authorities will offer support for its stock markets, which have plummeted to multi-year lows, while a hawkish tilt from the Bank of Japan lifted the yen.

The MSCI's broadest index of Asia-Pacific shares outside Japan was 0.27% higher. Still, the index is down 5% in January, set for its worst monthly performance since August.

Japan's Nikkei was 0.68% lower, a day after hitting a fresh 34-year high, and the yen strengthened as traders took note of the Bank of Japan's hawkish tilt on Tuesday.

The focus in Asia has squarely been on Chinese equity markets after a wretched start to the year. A report on Tuesday said that authorities were preparing a package of measures worth $278 billion to stabilise the market offered some hope the markets may steady though investors remained sceptical and unimpressed.

"I suspect policymakers would prefer markets to be more stable, but I doubt they plan to make huge unconditional injections into markets," said Ben Bennett, APAC investment strategist for Legal and General Investment Management.

"More they want to suggest that it’s not a one-way bet for markets to go down. Hopefully this leads to a bit of stabilization now."

On Wednesday, Chinese stocks was mixed. The blue chip index was 0.4% lower, rooted near the five-year lows, while the Shanghai Composite rose 0.11% higher. Hong Kong's Hang Seng index spiked 1.5% higher but is down 8% in January.

Hong Kong stocks were also boosted by Alibaba Group shares, which gained 6% after a report said co-founder Jack Ma and Chairman Joe Tsai bought millions worth of shares in the Chinese e-commerce giant in the fourth quarter.

Anderson Alves, a trader with ActivTrades, said market participants are vigilantly monitoring this development, as its confirmation or refutation could inject significant volatility.

"Should the package exceed expectations in scale and scope, it might trigger a substantial rally in equities, especially at the current levels."

Overnight, the S&P 500 climbed to a record high close as investors assessed a mixed bag of early quarterly results. [.N]

Netflix rallied 8% in extended trading after the video streaming service handily beat Wall Street subscriber estimates in the fourth quarter, driven by a strong slate of shows.

The currency market was fairly muted in early Asian hours, with the dollar index, which measures the U.S. currency against six rivals, little changed at 103.48. [FRX/]

The index is up 2% this month, on course for its strongest monthly performance since September as traders walk back their expectations of early and steep interest rate cuts from the Federal Reserve.

This week, the spotlight will switch to the U.S. personal consumption expenditure (PCE) index data, the Federal Reserve's preferred inflation gauge, as well as the S&P Global PMI readings, to assess the outlook for interest rates.

Markets are now pricing in a 47% chance of a rate cut in March from the Fed, according to the CME FedWatch tool, compared to the 88% chance of a rate cut priced in a month earlier.

The Japanese yen strengthened 0.16% to 148.14 per dollar on Wednesday. The BOJ on Tuesday maintained its ultra-easy monetary settings but signalled its growing conviction that conditions for phasing out its huge stimulus were falling into place, suggesting that an end to negative interest rates was nearing.

"It has been our long held view that April is the earliest that the BoJ would consider raising interest rates and ending yield curve control," Commonwealth Bank of Australia analyst Kristina Clifton said in a note.

"In the near term we expect dollar/yen to re?strengthen led by higher US Treasury yields as market participants reduce the risk of a FOMC rate cut in March."

The yield on 10-year Treasury notes was last at 4.138%, while the two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was at 4.339% in Asian hours.

U.S. crude prices rose 0.07% to $74.42 per barrel and Brent was at $79.61, up 0.08% on the day. [O/R]

Spot gold dropped 0.1% to $2,027.09 an ounce. [GOL/]