Chinese and European shares rise on AI optimism

European shares rose on Friday, following peers in Asia, which hit a three-month high on AI optimism, though gains were tempered by uncertainty over developments in Ukraine and the upcoming German elections.

Europe's broad Stoxx 600 nudged up 0.2 per cent, reversing two days of declines and pushing back towards a record high hit earlier in the week.

Germany is one major focus in Europe, and shares have been volatile this week as investors try to position ahead of Sunday's election.

Their main question is whether it will result in a government and parliament willing or able to reform the country's "debt brake", which limits Germany's structural deficit.

The blue-chip DAX, one of 2025's best-performing benchmarks so far, was flat around 2.5 per cent below Wednesday's record peak. Domestic-focused German mid caps were up 0.8 per cent on Friday, having hit a seven-month high early this week before falling sharply.

"With DAX up 13 per cent year-to-date, it may see some downside if the status quo prevails and smaller parties secure a blocking minority," said analysts at Barclays.

In contrast, if a more pro-reform parliament is elected, they see potential for both mid and large caps to gain.

More spending would likely boost the euro, and weigh on government bonds.

Investors are also trying to process the implications of negotiations between the US and Russia over a possible ceasefire in Ukraine.

Shares in Europe had been rising on hopes of peace, but have recently stalled, and hostile rhetoric from US President Donald Trump toward Ukraine has left investors in its bonds in shock.

There was economic data out too. Business activity in Germany's private sector picked up slightly in February, but contracted by much more than expected in France.

Overall, this left the euro lower against both the UK pound and the US dollar at $US1.1047 and 82.76 pence.

There was plenty happening in Asia too, and MSCI's broadest index of Asia-Pacific shares outside Japan jumped more than one per cent to its highest since November 8 on Friday, putting the index on track for a sixth straight week of gains - the longest such winning streak in over two years.

The move was led by a surge in Hong Kong- and China-listed stocks, which saw the Hang Seng Index scale a three-year peak and push the CSI300 index one per cent higher.

The Hang Seng Tech Index closed up 6.5 per cent, its best single-day gain since October.

Alibaba, up 12.7 per cent after it reported better-than-expected revenue, was the day's poster child, but Chinese stocks have been on a tear in recent days, driven by DeepSeek's AI breakthrough that reignited investor interest in China's technology capabilities.

The Hang Seng Tech Index has gained nearly 30 per cent for the year thus far, the S&P 500 is up just four per cent over the same period.

"DeepSeek has been a catalyst for sentiment changing," said Brian Arcese, portfolio manager at Foord Asset Management.

Also in the mix, earlier this week, Chinese President Xi Jinping held a rare meeting with some of the biggest names in China's technology sector, urging them to "show their talent" and be confident in the power of China's model and market.

The other mover in Asia was the Japanese yen, which took a breather after its recent rapid appreciation.

The dollar was last up 0.5 per cent on the yen at 150.4 after yen comments from Bank of Japan Governor Kazuo Ueda eased concerns that the central bank may be considering a more aggressive rate hike stance.

Those comments trumped data also Friday showing Japan's core consumer inflation hit 3.2 per cent in January, its fastest pace in 19 months.

In commodities, oil prices dipped but were headed for a weekly gain.

Brent crude oil futures eased 0.41 per cent to $US76.14 a barrel, but were set to rise more than two per cent for the week.

Gold hovered near a record high and was set to extend its gains for an eighth consecutive week.