By Rocky Swift

TOKYO, July 24 (Reuters) - Shares in Asia rallied and the Australian dollar hit an eight-month high on Thursday as optimism over earnings and trade supported demand for higher yielding assets.

Tokyo's broad Topix gauge of shares hit an all-time high, following new records on Wall Street overnight, after a trade pact between Japan and the U.S. stoked speculation more deals would appear soon to head off sweeping tariffs. Nasdaq and S&P futures rose after results by Google parent Alphabet beat estimates to kick off the "Magnificent Seven" earnings season.

The U.S. has also reached deals with the Philippines and Indonesia and an agreement with the European Union is also expected.

"Worst case concerns about tariffs in the U.S. are probably dissipating to some degree at the moment, but nonetheless, tariffs are going up and that is a hurdle for consumers," Brian Martin, ANZ's head of G3 economics, said in a podcast.

The EU and U.S. are closing in a trade deal that would impose 15% tariffs on European imports, while waiving duties on some items, according to officials from the European Commission. Meanwhile, Treasury Secretary Scott Bessent said U.S. and Chinese officials will meet in Stockholm next week.

Second-quarter earnings season is underway in the U.S., with 23% of the companies in the S&P 500 having reported. Of those, 85% have beaten Wall Street expectations, according to LSEG data.

Results from Magnificent Seven members, whose results have powered indexes to previous peaks, are in the spotlight for guidance on spending and returns surrounding artificial intelligence $(AI)$.

Alphabet GOOGL.O strongly beat estimates and cited massive demand for its cloud computing services as it hiked its capital spending plans. But electric car maker Tesla TSLA.O posted its worst quarterly sales decline in more than a decade and profit that trailed analyst targets.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was up 0.3%. Japan's Topix surged for a second day, rising 1.4% to surpass its previous all-time high reached last year.

The Australian dollar, a common proxy for risk sentiment, fetched $0.66 AUD=D3, just off $0.6604 hit earlier, which was the highest since November 2024. The U.S. dollar dropped 0.1% to 146.38 JPY= yen.

U.S. crude CLc1 climbed 0.4% to $65.5 a barrel. Spot gold XAU= was traded at $3,390.84 per ounce, up 0.1%.

In early trades, pan-region Euro Stoxx 50 futures STXEc1 shot up 1.3% at 5,435, while German DAX futures FDXc1 were up 1.3%.

U.S. stock futures, the S&P 500 e-minis ESc1, were up 0.13% and Nasdaq contracts NQc1 climbed 0.4%.

(Editing by Sam Holmes)

((rocky.swift@thomsonreuters.com;))