Asian shares perk up ahead of key policy events in China, U.S.

TOKYO (Reuters) – Asian share markets ticked up on Monday as investors cautiously looked to whether key policy events in the United States and China could allay concerns about slowing global economic growth.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.25 percent. The CSI 300 index of Shanghai and Shenzhen shares dipped 0.3 percent but managed to stay above its November low.

Japan’s Nikkei rose 0.6 percent while U.S. stock futures edged up 0.3 percent.

European shares are expected to start little changed, with spread-betters looking at an almost flat opening for Britain’s FTSE and France’s CAC and slight rises in Germany’s DAX.

MSCI’s broadest gauge of the world’s stocks covering 47 markets was up slightly after hitting the weakest close since July last year on Friday on mounting evidence of slowing growth in Europe and China.

China’s economy has been losing momentum in recent quarters as a multi-year government campaign to curb shadow lending put increasing financial strains on companies in a blow to production and investment.

Investors are now looking to a major speech by President Xi Jinping on Tuesday to mark the 40th anniversary of China’s reform and opening up.

China is also expected to hold its annual Central Economic Work Conference later this week, where key growth targets and policy goals for 2019 will be discussed.

The top decision-making body of the Communist Party, the politburo, said last week China will keep its economic growth within a reasonable range next year, striving to support jobs, trade and investment while pushing reforms and curbing risks.

“It’s generally assumed that you will need to expand fiscal and monetary support to achieve those goals. The market sentiment is being supported by expectations that there could be an announcement in that direction after the economic work conference,” said Wang Shenshen, strategist at Tokai Tokyo Research.

In the United States, the Federal Reserve is seen as almost certain to raise interest rates at its two-day policy meeting starting on Tuesday, further enhancing the dollar’s yield attraction.

At the same time, many market players also expect the Fed to lower its projections for future interest rate hikes given increasing headwinds to the economy.

“You could argue that if the Fed lower estimates, that could be taken as a further sign of economic slowdown,” said Hirokazu Kabeya, chief global strategist at Daiwa Securities.

“But given the fragile market sentiment, I would think it would be more dangerous if the Fed sticks to the view that it would raise rates three times next year.”

On Wall Street on Friday, the S&P 500 lost 1.91 percent to 2,599.95, marking its lowest close since April 2.

The benchmark has dropped 11.3 percent from its Sept. 20 record close – the worst performance since it fell more than 14 percent between May 2015 and January 2016.

In the currency market, the dollar held firm after having touched a 19-month high against a basket of six other major rivals on Friday as the U.S. economy appeared to be in better shape than others.

U.S. retail sales excluding automobiles, gasoline, building materials and food services rose 0.9 percent last month after an upwardly revised 0.7 percent increase in October.

Still, some analysts said the dollar could be held back by the probability of a partial U.S. government shutdown as President Donald Trump and federal lawmakers disagree over funding for a border wall. The stopgap funding bill agreed earlier this month will expire on Dec. 21.

The euro traded at $1.1307, having fallen to $1.1270 on Friday, its lowest level since Nov. 28.

IHS Markit’s Flash Composite Purchasing Managers’ Index slumped to 51.3, its weakest since November 2014, from a final November reading of 52.7. That was well below even the most pessimistic forecast in a Reuters poll where the median expectation was for a modest rise to 52.8.

The survey showed euro zone businesses ended the year in a gloomy mood, expanding their operations at the slowest pace in over four years as new orders growth all but dried up, hurt by trade tensions and violent protests in France.

Sterling hovered near its 20-month low touched last week, as concerns grew that Britain was headed for a chaotic exit from the European Union.

With just over 100 days until Britain leaves the bloc on March 29, Brexit remains up in the air with growing calls for a no-deal exit, a potentially disorderly divorce that business fears would be highly damaging, or for a second referendum.

The pound traded at $1.2580, about a cent above Wednesday’s low of $1.2477.

The yen was little moved at 113.45 per dollar.

The biggest mover was the Mexican peso, which gained after Mexico’s new leftist government avoided major surprises in its closely watched first budget, sticking to fiscal promises made earlier to investors.

The peso rose 0.7 percent to 20.102 on the dollar, edging near a key resistance of 20.

Oil prices licked wounds after Friday’s falls on concerns about the global economy.

U.S. West Texas Intermediate (WTI) crude futures stood almost flat at $51.26 per barrel, after a loss of 2.7 percent last week.