Asian shares creep higher as wary investors await US data, earnings

Most Asian stock markets rose on Tuesday, but gains were limited as investors awaited US retail sales data and corporate earnings to gauge the health of the world's biggest economy ahead of a likely US rate cut later this month.

European markets looked set for an equally cautious session, with the pan-region Euro Stoxx 50 futures down 0.14 per cent in early trade.

German DAX futures were up 0.04 per cent, FTSE futures were down 0.18 per cent, and financial spreadbetters saw France's CAC 40 opening flat.

MSCI's broadest index of Asia-Pacific shares outside Japan was last up 0.3 per cent, with losses in Chinese shares capping gains elsewhere in the region.

China's blue-chip CSI300 index fell 0.3 per cent as investors fretted over slower growth in the world's second-largest economy and the impact of the Sino-US trade war, even as new data highlighted Beijing's efforts to boost spending.

South Korea's KOSPI added 0.4 per cent after a slow start, and shares in Taiwan rose 0.1 per cent.

The Australian market shed 0.1 per cent, unmoved by the release of dovish minutes from the Reserve Bank of Australia's July meeting. Japan's Nikkei stock index ended down nearly 0.7 per cent.

Encouraging Chinese June data on Monday had provided some relief to investors worried about the economic outlook, but pressure on global business and investment from the trade war and slowing world growth are reinforcing expectations of a policy easing by major central banks.

“A US rate cut should make it easier for central banks in Asia to ease their policies, boosting domestic demand in the region,” said Yukino Yamada, senior strategist at Daiwa Securities.

“We still don't know what to expect from the US-China trade war ... But there are vague expectations that Trump will be quiet during summer and the issue will be put on the back burner until near China's National Day (in early October),” she said.

Overnight, US President Donald Trump showed no signs of softening his stance on China, warning that Washington could pile on more pressure as trade talks sputtered along.

US data on Tuesday is expected to show that retail sales rose 0.1 per cent in June, according to the median estimate of economists polled by Reuters. But a decline in net interest margin reported by Citigroup in its mixed quarterly report underlined risks for financial firms in a lower interest rate environment.

That decline partly overshadowed better-than-expected profit numbers, triggering a fall in shares of other banks on concerns that it would presage lower profits across the industry.

“Clearly the biggest risk to the most recent rally is the earnings season,” said Ryan Felsman, senior economist at CommSec in Sydney.

Signs of trade tensions weighing on corporate profits and the fading impact of tax cuts would underscore the US Federal Reserve's concerns over slowing investment, he said.

“That feeds into the narrative of concerns around the global economy, the slowing in the US economy, but also the need for potentially more aggressive rate cuts from the Fed to support the US economy going forward,” Felsman said.

Markets have fully priced in a 25-basis point cut by the Fed at its meeting at the end of this month.

The quiet Asian trading session, followed an equally subdued day on Wall Street, with the Dow Jones Industrial Average rising 0.1 per cent, the S&P 500 gaining 0.02 per cent and the Nasdaq Composite adding 0.17 per cent.

SLIGHT FLATTENING

Signs of an improving economic situation in the US have led to a steepening of the US yield curve, led by higher longer-dated yields.

That reversed slightly on Tuesday, with the yield on benchmark 10-year Treasury notes turning higher to 2.0973per cent compared with its US close of 2.092per cent on Monday.

The two-year yield, closely watched as a gauge of traders' expectations for Fed fund rates, gained faster, rising to 1.8416 per cent compared with a US close of 1.833 per cent.

In the currency market, the dollar was up 0.09 per cent against the yen at 108.00, and the euro ticked up 0.04 per cent, buying $1.1261.

The dollar index, which tracks the greenback against a basket of six major rivals, was a touch stronger at 96.962.

Oil prices steadied after earlier easing on signs that the impact of a tropical storm on the US Gulf Coast production would be short-lived.

Global benchmark Brent crude was flat at $66.48 per barrel, and US West Texas Intermediate (WTI) crude dipped 0.12 per cent to $59.51 per barrel.

Trade in gold echoed the cautious tone of equity markets ahead of US data. The precious metal was last down 0.03 per cent on the spot market at $1,413.20 per ounce.

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