Asia shares rise, dollar eases as ECB comments raise risk appetite

By Stella Q

SYDNEY (Reuters) – Asian shares rose on Tuesday, while the dollar was on the back foot for a third straight session as heightened expectations of an imminent European interest rate cut helped stoke risk appetite.

Gains were limited ahead of key inflation readings this week.

EUROSTOXX 50 futures rose 0.2%, with Europe set for a slightly stronger open. That would generate overnight gains after several European Central Bank officials said the ECB had room to cut interest rates as inflation eased.

As the debate now shifts to subsequent moves, markets have fully priced in two rate cuts by October this year. That lifted Wall Street stock futures ahead of the reopening of U.S. markets after a public holiday.

S&P 500 futures rose 0.1% and Nasdaq futures added 0.2%.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.2% after rising 0.9% on Monday. Taiwanese shares rose 0.5% to a record high, while Hong Kong’s Hang Seng index pared some earlier gains to 0.1%.

On the other hand, Japan’s Nikkei fell 0.2%, reversing a 0.7% advance a day earlier.

“We’re heading into the Northern Hemisphere summer, which is traditionally a period when markets come into that drift mode,” said Tony Sycamore, an analyst at IG.

Sycamore believes the Hang Seng will run higher after the recent period as the data supports further improvements in the Chinese economy. China will release surveys of manufacturing and services activities for May on Friday.

“I like the idea of ​​getting back into that trade in bullbacks, and I think it’s more upside, whereas the Nikkei is hanging question marks over that market right now.”

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He said the Nikkei failed to hit its record high in March and there were signs market participants were starting to pull money out of the benchmark to invest in Chinese markets.

Major risk events this week won’t occur until Friday when U.S. figures on core personal consumption expenditures (PCE) — the Federal Reserve’s preferred inflation gauge — and eurozone inflation data set the tone for trading.

In foreign exchange markets, the dollar retreated for the third straight session, last up 0.1% against its major peers as traders awaited the PCE release.

The average forecast for April is 0.3% higher than the previous month, while year-over-year expectations are for a 2.8% climb, with risks easing.

The Japanese yen was steady at 156.78 per dollar, slightly stronger than the key 157 level. However, the New Zealand dollar continued to weaken against higher-yielding currencies on Tuesday, hitting a new 17-year high of 96.56 yen. [FRX/]

Thanks to strong carry demand, the kiwi hit a 2-1/2-month high of $0.6155.

The cash Treasuries market returned with little movement from the holiday after taking a hit last week.

The two-year yield fell 1.6 basis points to 4.9375%, up 13 bps from the previous week, while the 10-year yield fell 1 bps to 4.4610%, after rising 5 bps the previous week.

Oil prices rose from the previous session. Brent futures were up 0.2% at $83.23 a barrel. U.S. crude oil prices for July were at $78.84 a barrel, up 1.4% from Friday’s close, trading through the U.S. holiday.

Gold rose for a third straight day, gaining 0.1% to $2,352.20 an ounce.

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(Reporting by Stella Qiu; Editing by Jacqueline Wong and Edwina Gibbs)

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