Asian stocks rise on focus on US inflation test, Fed meets By Reuters

By Rae Wee

SINGAPORE (Reuters) – Asian shares reversed early losses to rise marginally on Tuesday after a rebound on Wall Street, although concerns over a still struggling Chinese economy kept sentiment in check.

MSCI’s broadest index of Asia-Pacific shares outside Japan was last up 0.2 percent, after falling 1.11 percent in the previous session, hitting a one-month low.

last traded 0.4% higher, helped by gains in financial and consumer names.

Wall Street posted an impressive overnight rebound as all three major U.S. stock indexes rose more than 1 percent, rebounding from last week’s selloff.

“Risk-off sentiment stabilized overnight and US stocks recovered from Friday’s sell-off,” economists at ING said in a note.

“With non-farm payrolls figures failing to convince for a 50 basis point cut, markets are now looking to US inflation data to get a sense of the pace of the Fed’s rate cuts.”

A reading on US inflation is scheduled for Wednesday, where expectations are that the headline number will have slowed further to an annualized 2.6% in August.

“If the inflation number is different or significantly different from expectations, then the number of rate cuts (priced in) will be changed,” said Jun Bei Liu, portfolio manager at Tribeca Investment Partners.

“Right now, I think the market is pretty aggressive on pricing this part of the year, and so that probably opens up for a little bit more … volatility that we’ve seen over the last couple of weeks. “

The Federal Reserve is all but certain to ease rates when it meets next week, with markets pricing in a 29 percent chance of a whopping 50 basis point move. Discounts of around 110 bps are set for the rest of the year.

U.S. futures were mixed on Tuesday, last up 0.02 percent, but Nasdaq futures fell 0.07 percent.

EUROSTOXX 50 futures edged up 0.23% while losing 0.16%.

In currencies, the US dollar led the way, rising 0.22% against the yen to 143.47.

The euro was down slightly at $1.1032, while the pound was down 0.06% at $1.30655.

WOE CHINA

In Asia, concerns about China’s growth outlook also cast a cloud over markets after data on Monday showed the country’s consumer inflation accelerated in August to the fastest pace in half a year, but domestic demand remained fragile and output price deflation worsened.

That sent Chinese shares to seven-month lows in the previous session, while the yuan came under pressure from Beijing for more stimulus to support its economy.

In the offshore market, the yuan was 0.04 percent lower at 7.1234 per dollar.

“The stimulus, clearly, needs to be more. But unfortunately it’s been done in very, very small parcels and targeted, and it looks like the economy just isn’t turning around very quickly,” said Liu of Tribeca.

Trade data is due later on Tuesday, which could provide more clues about the pace of recovery in the world’s second largest economy.

Hong Kong’s benchmark index last rose 0.22 percent, while the mainland Hang Seng property index fell 0.2 percent, extending its 3.5 percent drop from the previous session. (.SS)

Trade tensions were heightened after the US House of Representatives on Monday passed a bill that seeks to restrict business with WuXi AppTec, BGI and several other Chinese biotech companies on national security grounds.

In commodities, oil prices steadied, with futures up 0.42% to $72.14 a barrel, while futures firmed 0.36% to $68.96 a barrel . (OR)

fell 0.03% to $2,504.34 an ounce. (EMPTY/)