Asia shares bounce on China property fund as Fed rate hike looms

Asian shares pared losses on Tuesday as investor sentiment improved on China's reported plans to tackle a debt crisis in real estate development.

MSCI's broadest gauge of Asia stocks outside Japan bounced back to a gain of 0.36% in afternoon sessions. Chinese stocks jumped after reports the country would set up a fund of up to $44 billion to help property developers.

Hong Kong's Hang Seng Index was 1.48% higher and China's benchmark CSI300 Index also widened gains to a rise of 0.91% at the morning close. Japan's Nikkei fell 0.08%, erasing some morning losses.

FTSE futures edged up 0.15%. U.S. markets are likely to open lower, with E-mini futures for the S&P 500 index down 0.32%.

U.S. retailer Walmart Inc cut its profit forecast on Monday and said customers were paring back discretionary purchases as inflation bit into household budgets. Shares fell 10% after hours.

Investors are also awaiting a likely 75 basis point Federal Reserve interest rate increase later this week - with markets pricing about a 10% risk of a larger hike, as well as waiting to see whether economic warning signs prompt a shift in rhetoric.

"We are leaning to the view that 75 bps is most likely but won't be the end unless they see some demand destruction and some tempering of inflation," said John Milroy, an investment adviser at Ord Minnett.

"We are fearful they have to materially slow the U.S. economy further."

Big technology companies such as Apple, Microsoft and Amazon.com are due to report earnings this week.

"The market has stabilized" from rate hike expectations, said Redmond Wong, Greater China market strategist at Saxo Markets in Hong Kong. "The focus is now on earnings."

In China, "maintaining stability is the key theme," said Wong on likely outcomes from politburo meetings expected to begin this week.

In currencies, the dollar was marginally softer but not drifting too far below recent milestone highs as uncertainty continued to swirl around the interest rate and economic outlook.

The euro rose 0.21% to $1.0240 but was hemmed in by uncertainty over Europe's energy security, which is not helped by a looming cut in the westbound flow of Russian gas.

The yen steadied at 136.54 per dollar. The U.S. dollar index, which touched a 20-year high this month, was down slightly at 106.380. [FRX/]

Oil prices rose further on expectations Russia's reduction in natural gas supply to Europe could encourage a switch to crude, with Brent futures last up 1.27% at $106.45 a barrel and U.S. crude up 1.26% at $97.92 a barrel.

Benchmark 10-year Treasury yields fell to 2.875% as growth worries gave support to bonds. [US/]

Gold hovered at $1,721.8 an ounce and bitcoin nursed overnight losses at $21,111.31.

 

(Reporting by Kane Wu in Hong Kong; Editing by Sam Holmes)