GLOBAL MARKETS-Asian shares pull ahead after encouraging Chinese data

* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* MSCI ex-Japan reverse losses; Chinese, HK shares bounce
off lows
* MSCI ex-Japan fell 1% last week after 5 straight weekly
gains
* Chinese Q2 GDP in-line with consensus, monthly activity
data
upbeat
* Morgan Stanley says re-enters short USD/JPY trade

By Swati Pandey
SYDNEY, July 15 (Reuters) - Asian shares advanced on Monday
as investors breathed a sigh of relief after encouraging Chinese
data suggested the world's second-biggest economy may be
starting to stabilise thanks to ramped-up stimulus from Beijing.
Second quarter economic growth slowed to 6.2% in the second
quarter from a year earlier, the weakest pace in at least 27
years while separate data showed the country's industrial output
and retail sales handily topped forecasts. The promising monthly activity data suggested a flurry of
stimulus measures from China have been able to prop-up domestic
activity and offset some of the damage from a protracted trade
war with the United States, analysts said.
Equity markets were choppy in the wake of the Chinese data
as some expected Beijing might temper further stimulus.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS gave up losses to be 0.2% higher at 526.72
points. It fell a little more than 1% last week, snapping five
straight weeks of gains.
Trading was expected to be light as Japan was shut for a
public holiday.
Australian shares .AXJO slipped 0.4% while South Korea's
KOSPI .KS11 was mostly flat. Chinese shares pared early losses
with the blue-chip index .CSI300 up 0.4%. Hong Kong's Hang
Seng index .HSI added 0.3%.
"Investors may be scaling back easing expectation upon
today's data as fiscal measures appear to be working," said
Westpac analyst Frances Cheung.
"That said, we believe the PBoC will still be supportive of
liquidity. Expect yields to be stable and any temporary
bearishness to be expressed via swaps."
Later in the week, U.S. retail sales and industrial
production data will provide more clues about the health of the
world's largest economy. The U.S. Federal Reserve will release
its 'Beige Book' on Wednesday which investors will scour for
comments on how trade tensions were affecting business outlook.
In currency markets, the Australian dollar AUD=D3 , often
played as a liquid proxy for the Chinese yuan, jumped after the
data to a high of $0.7033, a level not seen since July 4.
The greenback .DXY was a tad higher at 96.871 against a
basket of major currencies. The dollar index fell for three days
in a row as markets fully priced in the chance of a
25-basis-point (bps) cut to U.S. interest rates. There is also a
small probability of a 50 bps cut.
Against the Japanese yen JPY= , the dollar ticked up from
near the lowest since early June at 108.04 while the single
currency EUR= was slightly lower at $1.1267 after three
successive sessions of gains.
Expectations that the Fed will keep rates supportive have
sent bonds rallying with ten-year U.S. Treasuries US10YT=RR
below the current Fed rate range of 2.25%-2.50%. 0#FF:
"Dovish Fed rhetoric has rendered a July rate cut, in the
market's eyes, as a fait accompli: it's not if they cut but by
how much," Morgan Stanley strategist Hans Redekar told clients
in a note.
Redekar said the bank was re-entering its short dollar/long
yen position.
"If markets are disappointed, the yield curve would likely
flatten, the USD strengthen, and financial conditions tighten.
These forces would exacerbate the already considerable headwinds
facing the global economy," he added.
"Global reflation requires a weaker USD to bolster global
trade and commodity prices."
Worries about world growth and low inflation has meant
investors are piling money onto bonds and money market funds,
Jefferies said, citing its global asset fund flows tracker.
"The danger is that with a mountain of cash parked in money
market funds any trade ceasefire would cause a huge shift away
from safe assets," said Sean Darby, Jefferies' global equity
strategist.
"Presently, investors don't seem to be in any particular
rush to buy equities – earnings revisions have yet to bottom out
while economic surprises have been rare," he added.
"The bottom line is that we would issue a pause on the risk
rally."
In commodities, U.S. crude CLc1 fell31 cents to $59.90 a
barrel. Brent crude LCOc1 was off 22 cents at $66.50.
Gold XAU= slipped to 1,410.01 an ounce, drifting away from
a recent six-year top of $1,438.60.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Asia stock markets https://tmsnrt.rs/2zpUAr4
Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Editing by Kim Coghill & Shri Navaratnam)