Asian shares return to gains as markets digest China trade data

By Shinichi Saoshiro

Asian shares edged up on Wednesday, as markets digested Chinese trade data against the backdrop of a brightening energy sector outlook and an expected delay in interest rate hikes by the U.S. Federal Reserve.

European markets though were poised for a subdued start, with financial spreadbetters expecting Britain's FTSE 100 and France's CAC to open down 0.2 percent, and Germany's DAX to start the day 0.3 percent lower.

The MSCI's broadest index of Asia-Pacific shares outside Japan erased earlier losses to climb 0.2 percent, as investors weighed May Chinese imports that beat predictions against worse-than-expected exports. The Asia ex-Japan index remained near the six-week high hit on Tuesday.

Japan's Nikkei also staged a turnaround, rising 0.6 percent.

"Global equities are firmer, but it is not indicative of an uptake in risk appetite," Bernard Aw, market strategist at IG, wrote in a note. "The upmove was mostly driven by higher oil prices."

China's CSI 300 and the Shanghai Composite indices both pared earlier losses, but remained lower. The CSI 300 was down about 0.4 percent and the Shanghai Composite fell 0.3 percent in thin trading, ahead of market closures on Thursday and Friday for the Dragon Boat weekend holiday.

Hong Kong's Hang Seng slid 0.3 percent. Hong Kong is also closed on Thursday.

Chinese dollar-denominated exports declined 4.1 percent in May from a year earlier, compared with an expected drop of 3.6 percent. Imports fell 0.4 percent, less than the predicted 6 percent, and the smallest decline since they turned negative in November 2014. China's trade surplus is forecast to hit $50 billion in May. [ECONCN]

Despite the weak exports, the Chinese central bank said on Wednesday it still expects the economy to grow by 6.8 percent this year.

On Wall Street, the U.S. S&P 500 Index rose 0.1 percent to 2,112 overnight, less than 20 points away from its record closing high marked in May last year.

The advance was led by 2.1 percent gains in energy shares as oil prices jumped more than 1 percent to hit eight-month highs on expectations of domestic stockpile draws and worries about supply shortfalls from attacks on Nigeria's oil industry.

A report from trade group American Petroleum Institute (API), released after Tuesday's close showed a crude draw of 3.6 million barrels, larger than expectations of 2.7 million barrels, supporting the market.

U.S. crude futures rose 0.1 percent to $50.50 per barrel. Global benchmark Brent futures also gained 0.1 percent to $51.51.

Both remained close to the highest level since October, seen earlier in the session.

Investors further trimmed expectations of Fed rate hikes as they assessed Friday's employment report that showed new hires sharply dropped in May.

Data published on Tuesday confirmed U.S. nonfarm productivity fell in the first quarter on a surge in labour-related costs, suggesting companies may have had to slow hiring after their hiring earlier this year outpaced revenue growth.

The 10-year U.S. Treasuries yield was last at 1.7125, testing strong support at around 1.70 percent.

In Europe, German bond yields hit a record low of 0.045 percent on Tuesday as investors sought a safe haven ahead of Britain's referendum on EU membership.

The British pound was off Monday's three-week low but remained volatile. It traded at $1.4555 , compared with Monday's low of $1.4352.

The dollar also licked its wounds near four-week lows after the job data quashed expectations of a Fed rate hike in the next couple of months.

The dollar index stood at 93.694, the lowest level in almost a month.

The euro advanced 0.2 percent to $1.13730 while the yen rose 0.3 percent to 107.030 per dollar.

The dollar's weakness proved a boon for gold, which hit a two-week high of $1,249.20 an ounce on Wednesday. Spot gold was last trading up 0.3 percent at 1,247.30.

/By Reuters/