Asian shares firmed toward recent peaks on Monday as Chinese markets swung higher, while investors waited to see if the recent sell-off in longer-dated U.S. Treasuries would extend and maybe take some pressure off the beleaguered dollar.
MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.5% to 565.74, moving nearer to the January top of 574.52.
Chinese blue chips led the way with gains of 2.0%, with the country’s central bank providing more medium term loans to the financial system.
Japan’s Nikkei dipped 0.6% after touching a six-month peak on Friday, as the country suffered its biggest economic contraction on record in the second quarter.
E-Mini futures for the S&P 500 firmed 0.39% to be just below the record close of 3,386.15.
The U.S. second-quarter earnings season wraps up with the major retailers reporting this week, including Walmart Inc, Home Depot Inc and Kohls Corp.
Politics will be a feature as the Democratic National Convention kicks off the 2020 presidential election season.
News that the scheduled review of the U.S.-China Phase-One trade deal over the weekend had been postponed indefinitely didn’t elicit much of a reaction.
The highlight of the economic calendar will be the release of the minutes from the Federal Reserve’s last policy meeting.
Speculation is rife the Fed will adapt an average inflation target, which would seek to push inflation above 2% for some time to make up for the years it has run below it.
That combined with massive new debt supply caused a sharp increase in longer-term bond yields last week with 30-year yields rising 21 basis points as the curve steepened.
The lift in yields gave the dollar some respite after weeks of losses. Against a basket of currencies the dollar was a fraction lower at 93.035, still uncomfortably close to the recent trough of 92.521.
The euro flattened out a little late last week having met resistance around the two-year peak of $1.1915. Yet it still ended the week with a gain of 0.5% and was last holding firm at $1.1856.
The single currency has also made a notable break higher on the yen to reach ground not trod since April 2019. Indeed, the yen fell against most of its peers last week, with the dollar holding at 106.59 yen on Monday.
In commodity markets, gold eased 0.4% to $1,935 an ounce, after the jump in bond yields saw it lose 4.5% last week in its worst performance since March.
Oil prices edged ahead on hopes for Chinese demand and after data showed crude oil, gasoline, and distillate inventories all declined in the week-ending Aug. 7.
Brent crude futures rose 33 cents to $45.13 a barrel, while U.S. crude gained 39 cent to $42.40.