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Asian shares edge higher ahead of US inflation data


MSCI’s broadest index of Asia-Pacific shares outside Japan were higher at 700.6 points, Nikkei and Australia’s benchmark shares added 0.4 per cent each, Chinese blue-chip index rose 0.9 per cent

Asian shares edged higher but held their recent trading range on Thursday as investors focussed on US inflation data and the risk of an upside surprise that could prompt the Federal Reserve to start tapering its massive stimulus.

MSCI’s broadest index of Asia-Pacific shares outside Japan were marginally higher at 700.6 points, but stayed in the 698-712 points range it has traded in since late May.

Japan’s Nikkei and Australia’s benchmark shares added 0.4 per cent each. Chinese shares advanced with the blue-chip index up 0.9 per cent.

Overnight, fixed income markets were the big movers, with some analysts pointing to a setback to more US stimulus efforts, while others suggested a likely clearing out of short positions ahead of the May CPI.

Short positions in Treasuries were the highest since 2018, according to JP Morgan positioning data last week.

The yield on benchmark 10-year US Treasury notes dropped to 1.4891 per cent from 1.528 per cent late on Tuesday. A fall below 1.47 per cent would take yields to the lowest since March 4.

Also at play was some thought that hedge funds may have shifted their bond allocation, driven by lower volatility in the bond market recently, analysts said.

On Wall Street overnight, the S&P 500 came within a whisker of its all-time high set in May as big tech rallied along with healthcare stocks, but ended 0.1 per cent lower. The Dow shed 0.44 per cent and the Nasdaq Composite lost 0.09 per cent.

Markets are looking to the European Central Bank (ECB) policy meeting later in the day where it will likely keep its policy guidance unchanged and publish updated euro area macro-economic projections.

Also later in the day, expectations are that US CPI will accelerate 0.4 per cent in May, taking the annual pace to 3.4 per cent, according to a Reuters Poll.

A significant upside surprise in inflation could tilt the Fed taper discussion to sooner rather than later, though the majority would still be looking for substantial progress toward maximum employment before considering tapering, ANZ economists wrote in a note.

So far though, the market is buying into the Fed’s view that the rise in prices is transitory and the Fed will not alter its policy guidance at next week’s FOMC meeting, they added.

Analysts said the data would be key for gold as a higher print and the subsequent tapering fears could reduce the yellow metal’s lustre.

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