SYDNEY, May 15 (Reuters) – Asian shares rose cautiously on Monday as investors braced for the release of China’s industrial and retail sales data, while U.S. Federal Reserve officials awaited talks to justify the market price of rate cuts this year.
Guarded optimism extended to Europe as markets opened, with pan-region Euro Stoxx 50 futures up 0.2%. Both S&P 500 futures and Nasdaq futures were mostly flat.
In emerging markets, the Turkish lira hit a two-month low after weekend elections, while the Thai baht rallied nearly 1% after Thailand’s opposition defeated pro-military parties in weekend polls.
On Monday, MSCI’s broadest index of Asia-Pacific shares outside Japan ( .MIAPJ0000PUS ) pared earlier losses to 0.5%, driven by a late rebound in Chinese and Hong Kong shares after a steep sell-off a week earlier.
Hong Kong’s Hang Seng Index (.HSI) charged 1.2% higher, while China’s blue chips rose 0.6%. Japan’s Nikkei (.N225) advanced 0.7%, building on last week’s optimism for the earnings season.
China’s central bank kept rates on medium-term policy loans steady on Monday, although expectations are building that monetary policy easing may be inevitable in the coming months to support an economic recovery.
Hong Kong Exchanges & Clearing Ltd (HKEX) on Monday added a new connect program that links markets in the financial center to the mainland by deploying offshore interest rate derivatives to help foreign investors in Chinese bonds hedge their exposure.
China is due to report monthly industrial production, retail sales and fixed asset investment data on Tuesday.
“A big year-over-year improvement shouldn’t be surprising when measured against a stagnant economy that has been in lockdown,” said Chris Weston, head of research at Pepperstone.
“However, China’s growth has been at the center of market moves as China data has thrown up some concerns of late – we’ve seen poor import, PPI and credit data -,” Weston said.
This week, several Federal Reserve officials are speaking out, including Chair Jerome Powell, who is set for Friday and could make plenty of headlines to move the dial further.
Traders held odds on the central bank’s balance sheet rate steady at 17.7%, up from 8.5% a week ago, after U.S. long-term inflation expectations rose to their highest since 2011, boosting the dollar and Treasury yields.
However, the bet is still on three-quarter-point cuts after CPI and PPI data backed the Fed’s case for a pause as inflation eased.
Federal Reserve Governor Michelle Bowman said on Friday that if inflation remains high, the US Federal Reserve may need to raise interest rates further.
“While we think the directional bias is correct, meaning the next move is a cut rather than a rise, it could soften global growth now, or take sharply weaker growth to even meet current market prices, or fuel a more dire re-pricing.” said John Briggs, global head of economics at NatWest Markets.
Growth worries, U.S. debt ceiling worries and lingering banking fears pushed the safe-haven dollar to a five-week high against major peers on Monday, extending its best weekly rise since September.
Last week it rose 1.4% to 102.64.
US President Joe Biden is expected to meet with congressional leaders on Tuesday to negotiate a way to raise the nation’s debt ceiling and avoid a catastrophic repayment.
Concerns about the U.S. Congress not raising the debt ceiling in time have created major distortions at the short end of the yield curve, as investors have poured into alternative issues, avoiding bills due when Treasuries are at risk of running out of funds.
The benchmark 10-year note’s yield was unchanged at 3.4775% after rising 6 basis points on Friday, while the two-year yield was steady at 4.004%, up 10 basis points in the previous session.
Crude oil prices fell for the fourth consecutive session. U.S. crude was down 0.6% at $69.61 a barrel, while Brent crude was down 0.6% at $73.68 a barrel.
Gold prices rose 0.4% to $2,018.19 an ounce.
Report by Stella Qiu; Editing by Sonali Pal
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