Asian investors began edging back into the market on Tuesday after a two-day sell-off fuelled by fears about the impact of Omicron on the global recovery, while oil extended its rebound, though uncertainty continues to hang over trading floors.

The gains followed an advance on Wall Street and Europe, which started the week by making some inroads into Friday's worldwide rout that came on the back of news about the new Covid strain that has forced numerous countries to throw up fresh travel bans.

Observers said that the reaction last week may have been overdone as there was still a lot to find out about Omicron, while the billions of people now vaccinated should offer some protection.

Meanwhile, major drugs firms have said they are already working on a jab specific to the new strain.

The slightly less negative mood helped most Asian markets higher Tuesday, with Tokyo, Shanghai, Sydney, Wellington, Taipei and Jakarta up.

However, Hong Kong was dragged by fresh selling in the tech sector while casinos extended Monday's steep losses following news that the head of gambling enclave Macau's largest junket operator had been arrested.

Seoul was also lower.

There was little reaction to news that China's factory activity picked up more than expected last month thanks to an easing of power shortages in the country.

There remains a lot of uncertainty among traders, and experts said it would take weeks before the full effects of the virus are known, while the World Health Organization warned it poses a "very high" risk globally

And Federal Reserve boss Jerome Powell warned the latest emergency posed "downside risks to employment and economic activity, and increased uncertainty for inflation".

In prepared comments ahead of an appearance in front of the Senate Banking Committee later Tuesday, he also said the virus could "intensify supply-chain disruptions" that have been a major cause of the spike in inflation this year.

The surge in prices this year has forced several central banks in recent months to raise interest rates or tighten the ultra-loose monetary policies put in place at the start of the pandemic, and analysts said that continued to play on investors' minds.

"We'll get a new variant, we'll get new waves but the market, and we all as investors, will see how that might play out," Jason Brady, president at Thornburg Investment Management, told Bloomberg Television.

"I'm much more interested in inflation and potentially rising rates causing some of the market leaders of 2020 and 2021 to falter a little bit more."

On oil markets, both main contracts built on Monday's gains but still have a long way to go to regain the losses of more than 10 percent suffered Friday on fears about demand.

Focus is now on OPEC and other key producers, which are due to decide on whether to press on with their plan to lift output each month in light of the new travel restrictions and the threat of Omicron.

Howie Lee, of Oversea-Chinese Banking Corp, said if OPEC+ "do pause, it will provide another reason for oil to find a firmer footing".

- Key figures around 0230 GMT -

Tokyo - Nikkei 225: UP 0.8 percent at 28,498.91 (break)

Hong Kong - Hang Seng Index: DOWN 1.2 percent at 23,563.20

Shanghai - Composite: UP 0.2 percent at 3,567.96

West Texas Intermediate: UP 1.2 percent to $70.80

Brent North Sea crude: UP 0.9 percent at $74.10 per barrel

Dollar/yen: UP at 113.66 yen from 113.58 yen at 2040 GMT

Pound/dollar: UP at $1.3323 from $1.3310

Euro/dollar: UP at $1.1301 from $1.1291

Euro/pound: UP at 84.82 pence from 84.80 pence

New York - Dow: UP 0.7 percent at 35,135.94 (close)

London - FTSE 100: UP 0.9 percent at 7,109.95 (close)