Asian stocks in the lead, the Fed's caution to the dollar

SYDNEY (Reuters) – Asian stocks have been cautiously advancing on Monday amid conflicting signals about the chances of a truce in the Sino-US trade dispute, while a new worry about the Fed's global outlook. mined the dollar.

The widest MSCI index of the Asia-Pacific equity market outside of Japan .MIAPJ0000PUS stood at 0.1% and South Korea .KS11 at 0.5%. Japan's Nikkei .N225 gained 0.4%, but E-Mini futures for the S & P 500 ESc1 fell 0.3%.

Wall Street tightened on Friday after US President Donald Trump said he could not impose more tariffs on Chinese products after Beijing sent a list of measures it was willing to take to resolve trade tensions.

The comment fueled speculation about an agreement when Trump will meet Chinese President Xi Jinping on the sidelines of the G20 summit in Argentina later this month.

However, tensions between Sino and the United States were clearly visible at an APEC meeting in Papua New Guinea this weekend, during which leaders did not failed to agree on a release for the first time.

US Vice President Mike Pence said in a direct speech that US tariffs on Chinese goods would not cost more than $ 250 billion until China changed its habits.

"Trump's comments were seen as a glimmer of hope that new pricing measures could be put on hold," said Ray Attrill, head of NAB's foreign exchange strategy.

"The exchange of beards between Pence and Chinese President Xi Jinping in PNG this weekend continues to suggest that this is unlikely."

DETECT A FED SHIFT

The outlook for US interest rates was also uncertain.

Federal Reserve policymakers are still announcing upcoming rate hikes, but they also seem more worried about a possible global slowdown, suggesting that the tightening cycle would not be much longer.

"Fed officials are more likely to show a slightly less hawkish trend by noting the global slowdown that is taking shape," said Alan Ruskin, macroeconomic strategist at Deutsche Bank.

"This undermines expectations of a rate hike above the" neutral ", which the Fed has named between 2.5 and 3%. "This change of tone is subtle, but it is the most bullish tone of the bond market in recent times and is starting to have a significant impact on the dollar."

This will draw attention to an appearance of Fed Chairman in New York, John Williams, later on Monday, to see if he takes up the same theme.

Investors have already lengthened the probabilities of further increases, with a move in December estimated at 75%, against 90% previously. Futures contracts imply rates of around 2.75% by the end of next year, compared with 2.93% at the beginning of the month. <0#FF:>

US 10YT = RR 10-year paper yields fell to 3.06%, from a recent high of 3.25%.

The dollar followed to reach 96.438 .DXY against a basket of currencies, down from a high of 97.693. The euro was up at 1.11414 USD = D3, while the dollar retreated to 112.77 JPY yen.

The pound remained vulnerable at 1.2833 USD, after the political turmoil caused by Brexit caused heavy losses last week.

British Prime Minister Theresa May said on Sunday that overthrowing her would risk delaying Brexit, as her own party might face a leadership challenge.

Pro-EU and pro-Brexit lawmakers being unhappy with the draft agreement, it is not clear that it will be able to win Parliament's support, increasing the risk that Britain will leave the EU without agreement.

In commodity markets, gold was supported by the falling dollar and held steady at $ 1,122.67.

Oil prices suffered their sixth consecutive week of losses, but found help from the expectations of the Organization of the Petroleum Exporting Countries (CPP), which would like to reduce their production. [O/R]

Brent crude LCoC1 rose 55 cents to 67.31 dollars per barrel, while US crude gained 58 cents to 57.04 CLc1.