GLOBAL MARKETS-Encouraging Chinese data pulls Asian shares higher

* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* MSCI ex-Japan reverse losses; Chinese, HK shares bounce
off lows
* Futures for European indices, E-minis for S&P500 rise
* China Q2 GDP matches 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.
The positive mood appeared likely to spread, with early
European trades showing the pan-region Euro Stoxx 50 futures
STXEc1 up 0.1%. Futures for Germany's DAX FDXc1 and France's
CAC 40 rose 0.1% each while FTSE futures FFIc1 were flat.
E-minis for the S&P500 ESc1 added 0.1%.
Second quarter economic growth slowed to 6.2% 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
growth 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 reversed earlier losses to be 0.2% higher. It
fell a little more than 1% last week, ending five straight weeks
of gains.
Trading was light on Monday as Japan was shut for a public
holiday.
Chinese shares were down before Monday's data release, after
which they pared losses and then produced gains for the day. The
blue-chip index .CSI300 gained 0.4% for the day. Hong Kong's
Hang Seng index .HSI was up 0.2%.
Australian shares .AXJO lost 0.7% while South Korea's
KOSPI .KS11 slipped 0.2%.
"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 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 the 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. It was
last up 0.2% at $0.7030.
The greenback .DXY was barely changed at 96.841 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 108.01 while the single
currency EUR= paused at $1.1272 after three successive
sessions of gains.
Expectations that the Fed will keep rates supportive have
sent bonds rallying with yields on ten-year U.S. Treasuries
US10YT=RR now 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, low inflation and ongoing
Sino-U.S. trade tensions have 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 fell 21 cents to $60 a
barrel. Brent crude LCOc1 was off 10 cents at $66.62.
Gold XAU= slipped to 1,414.25 an ounce, drifting away from
a recent six-year top of $1,438.60.

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(Editing by Shri Navaratnam and Richard Borsuk)