HONG KONG: Asia markets clawed back the week's losses on Thursday after Wall Street broke a two-day dip overnight that had been sparked by Covid-19 jitters and valuation fears.

Investors took the New York drop as a cue to buy, with the Dow rising back above 34,000 and closing in on last week's record finish.

Further growth in US stocks is on the horizon in the coming days with analysts expecting a run of corporate results to give a clearer picture of the post-pandemic American economy.

"US equities recovered Wednesday, snapping an untimely case of an uncontrollable run of two-day hic-ups as investors quickly digested the primary culprit, a toxic elixir of two parts technical and one-part Covid heebie-jeebies," said Stephen Innes of Axi.

"Spooky events will happen from time to time but provided the macros hold up and the Fed continues to toggle the policy taps wide open, it's unlikely the market will shift too far from the recovery reality," he added.

Wall Street was showing "strong potential for additional upside" as earnings season progressed, PIMCO portfolio manager Erin Browne told Bloomberg TV.

"While certainly investors have priced in a lot in terms of normalisation in certain segments of the market, I still think that there is room to run," she added.

Tokyo led the Asian recovery with the Nikkei up more than two percent by the break, despite an escalating coronavirus outbreak just three months before Japan hosts the pandemic-delayed Olympics.

Organisers said they may hold off on a planned announcement this month to dictate how many domestic spectators can attend the Games in light of the virus situation, after earlier barring overseas fans.

Analysts warned that an expected further tightening of coronavirus restrictions could generate worries over economic recovery as cases spike in Tokyo and elsewhere.

Hong Kong was up 0.3 percent while Sydney, Seoul, Singapore and Taipei were all on the rise, but Shanghai was down 0.1 percent.