Last week's market turmoil was replaced by calmer conditions this week after a raft of US economic data allayed recession fears in the world's largest economy and pushed back against expectations for aggressive US rate cuts.

"Our assessment is that the market fallout from the weak early August US data was disproportionate and in large part reflected the rapid unwind of crowded positions in some markets," said Jonas Goltermann, deputy chief markets economist at Capital Economics.

"While the risk of a recession in the US has increased a little, there are few signs of a more substantial crisis brewing."

MSCI's broadest index of Asia-Pacific shares outside Japan advanced 0.34 percent in early trade and was set to rise 1.3 percent for the week, while US futures extended gains following a strong overnight cash session on Wall Street.

S&P 500 futures rose 0.09 percent, while Nasdaq futures added 0.17 percent.

Strong US retail sales data and low weekly jobless claims were the latest shot in the arm for the positive risk mood, following a benign inflation report earlier this week that reaffirmed bets for imminent Fed rate cuts, but likely at a measured pace.

Markets are now pricing in just a 25 percent chance of a 50-basis-point cut from the Federal Reserve next month, down from 55 percent a week ago, according to the CME tool.

"The totality of data tells us disinflation is continuing and the Fed is almost certain to cut rates in September by 25bps," said David Chao, Invesco's global market strategist for Asia Pacific ex-Japan.

"But I do believe that the July inflation report diminishes the chances of a super-size cut, though this was never in the cards."

Japan's Nikkei got off to a strong start and jumped 2.7 percent.

The Nikkei, which suffered heavy losses last week exacerbated by the unwinding of yen-funded carry trades, was poised for a weekly gain of 7.6 percent, its best performance since April 2020.

Friday's gains were in part helped by a weaker yen which last stood at 149.08 per dollar, languishing near a two-week low of 149.40 hit in the previous session and some distance away from last week's seven-month peak.

The Swiss franc, which also surged last week on the back of a flight to safety, was little changed at 0.8716 per dollar and looked set to lose 0.7 percent for the week.

In other currencies, the euro struggled to break above the $1.10 level against a firmer dollar, which was buoyed by elevated US Treasury yields.

The two-year yield hovered near an over one-week high and last stood at 4.0846 percent, while the benchmark 10-year yield steadied at 3.9112 percent.

In commodities, oil prices edged lower on Friday, though were set for a weekly gain as the upbeat US economic data eased investor worries about a potential recession in the top oil consuming nation.

Brent crude futures dipped 0.19 percent to $80.88 per barrel, while US West Texas Intermediate crude futures eased 0.28 percent to $77.94 a barrel. Still, the two were eyeing a weekly gain of more than 1 percent.

Spot gold ticked up 0.07 percent to $2,457.79 an ounce.