Asian stocks up, Fed caution slows dollar

SYDNEY (Reuters) – Asian stocks moved cautiously on Monday amid conflicting signals about the possibility of a truce in the Sino-US trade dispute, while the Federal Reserve's renewed concern over the global economy is undermining the dollar.

MSCI's broadest index, comprised of Asia-Pacific equities outside Japan, rose 0.1% and China's safe haven 0.5%.

Japan's Nikkei gained 0.4%, but E-Mini futures for the S & P 500 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 increased the likelihood of further increases, with December's move up to 73%, down more than 90%. Futures contracts imply rates of around 2.74% by the end of next year, compared with 2.93% at the beginning of the month. <0#FF:>

US 10-year paper yields dropped sharply to 3.06% from a recent high of 3.25%.

The dollar followed to reach 96.441 against a basket of currencies, down from a high of 97.693. The euro was up to 1.1414 dollar, while the dollar was down to 112.66 yen.

The pound sterling remained vulnerable to $ 1.2833 after the Brexit-led political turmoil that 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 commodities markets, gold was supported by the falling dollar and held at $ 1221.92.

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.

Brent rose 72 cents to 67.48 dollars a barrel, while the US crude gained 76 cents to 57.22 dollars.