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Asian shares rise on Fed bets; China stocks narrow losses on strong GDP

A stock quotation board displays the Nikkei 225 key index of the Tokyo Stock Exchange in front of a securities company in Tokyo, on July 5, 2017.

KAZUHIRO NOGI/AFP/Getty Images

Asian stocks mostly rose on Monday, spurred by record high closes for the Dow and S&P 500 on bets that the Federal Reserve's policy will remain accommodative following lacklustre U.S. data, which sent the dollar reeling to a 10-month low.

Chinese stocks fell over 2 per cent in early trade but recouped some of the losses after data showed the economy grew at a slightly faster than expected pace of 6.9 per cent in the second quarter thanks to robust industrial output and retail sales.

The CSI 300 was 0.7 per cent lower, and the Shanghai Composite was down 1.1 per cent.

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MSCI's broadest index of Asia-Pacific shares outside Japan advanced 0.2 per cent on Monday. Japanese markets were closed for a holiday.

Australian shares were 0.3 per cent lower, while South Korea's KOSPI jumped 0.3 per cent.

Wall Street closed higher on Friday, after data showed consumer prices were unchanged in June and retail sales fell for a second straight month, pointing to tame inflation and subdued expectations of strong economic growth in the second quarter.

The chances of a rate hike in December fell to 43.1 per cent after the data came out from 55 per cent late Thursday, according to the CME Group's Fedwatch tool.

The dollar index, which tracks the greenback against a basket of trade-weighted peers, hit a 10-month low early on Monday. It was trading flat at 95.156 after losing 0.6 per cent on Friday.

"Friday's U.S. data led to more USD selling," Stephen Innes, senior trader at OANDA, wrote in a note.

"With less than a 50 per cent December rate hike probability priced in, and with no supportive Fed speak on the calendar before July 26th, the dollar could struggle."

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U.S. 10-year Treasury yields, however, which fell to as low as 2.279, recovered to end at 2.3319 per cent on Friday.

The dollar was also steady at 112.55 yen early on Monday, after closing down 0.6 per cent on Friday.

The Bank of Japan is expected to keep its monetary policy settings unchanged when it meets on Wednesday and Thursday.

The weakness in the dollar saw other currencies soar, with the Australian dollar hitting its highest level in over two years and the Canadian dollar touching a one-year high early on Monday.

The Aussie was trading 0.2 per cent lower than its Friday close at $0.7813, following a 1.3 per cent surge, and the loonie was 0.1 per cent weaker at C$1.2654 to the dollar, retaining Friday's 0.6 per cent jump.

The euro slipped slightly to $1.14615, but remained close to its highest in a year hit last week, after gaining 0.6 per cent on Friday.

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In commodities, oil inched higher, extending last week's gains on signs of lower U.S. inventories and higher Chinese demand.

U.S. crude rose 0.25 per cent to $46.67 a barrel.

Global benchmark Brent added 0.3 per cent to $49.07.

The dollar's loss was gold's gain, with the precious metal rising on Friday. Spot gold was 0.2 per cent higher at $1,231.01 an ounce.

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