Asian stocks extended a global rally on Friday on hopes a Middle East peace deal may finally materialise, while the dollar and bond yields dropped and oil prices marked two-month lows, tempering inflation fears.European bourses are set to open sharply higher, with pan-region futures up 1.8 per cent. Wall Street futures rose about 0.2 per cent, building on the strong rally from overnight.All eyes are on the hotly awaited market debut of Elon Musk’s SpaceX, which has made history with the biggest-ever initial public offering. The IPO raised a record $75 billion, valuing the rocket and spacecraft manufacturer at $1.77 trillion and making Musk the world’s first trillionaire.US president Donald Trump said on Thursday that a peace deal could be signed as soon as this weekend, hours after threatening more strikes on Iran. He said negotiations with Tehran had advanced to the highest levels of Iran’s ⁠leadership and had been approved by a broad coalition of regional powers.Trump’s remarks follow repeated bouts of optimism from the president that have failed to yield a deal, keeping markets on edge. In this case too, Iran countered that it had not reached a final decision on an agreement.Nonetheless, “this does look perhaps a bit more tangible than we have had,” said Ray Attrill, head of FX strategy at National Australia Bank.“If we hear something from Iran that sounds positive, the odds [of a peace deal] are clearly going to flip quite dramatically.”The deal, if confirmed, would be the most significant diplomatic breakthrough yet to end the three-month-old war, which sent global energy prices sharply higher. The European Central Bank had to raise interest rates for the first time in nearly three years on Thursday to nip war-driven inflation in the bud.Oil prices slumped to two-month lows on expectations of an impending ⁠agreement. Brent crude futures dropped 1.8 per cent at $88.76 per barrel, having fallen nearly 3 per cent overnight.MSCI’s broadest index of Asia-Pacific shares outside Japan jumped 3.7 per cent, led by a 7.8 per cent surge in South Korea’s Kospi. Japan’s Nikkei rose 3.6 per cent.China’s blue-chip CSI300 rose 1.5 per cent, while Hong Kong’s Hang Seng gained 2 per cent.Overnight, Wall Street rallied with the three major indexes registering their biggest daily gains since April 8th, when the US and Iran agreed to a temporary ceasefire. The Nasdaq jumped 2.5 per cent, helped by expectations of a strong market debut for Musk’s SpaceX.“With a fixed offer price and a larger than usual retail allocation, the early float is also likely to be held by a more diverse and potentially less patient investor base, which could amplify near-term volatility,” said Hugh Lam, an investment strategist at Betashares.Treasuries held onto gains as hopes of a peace deal in the Gulf led markets to trim bets of a rate hike from the Federal Reserve this year. Pricing for a hike in October has come down to 36 per cent from 51 per cent.Two-year Treasury yields were steady at 4.073 per cent on Friday, having slumped 6 basis points overnight. Benchmark 10-year Treasury yields held at 4.4690 per cent, after falling almost 8 basis points overnight.The dollar stabilised after overnight losses. It rose 0.2 per cent to 160.20 yen, after retreating 0.4 per cent in the prior session. Traders are still on high alert for intervention from Japanese authorities as the yen stays close to the 160 level that many see as a line in the sand.Precious metals retreated on Friday. Spot gold slipped 0.7 per cent to $4,183 an ounce, following a 3.5 per cent jump overnight, while spot silver also fell 0.9 per cent to $66.72 an ounce, after a 5.8 per cent gain. – Reuters