Asia shares hit 15-month high as traders wait for CPI

Asian shares hovered around 15-month highs on Tuesday and the dollar was firm ahead of highly anticipated U.S. inflation data, while Japanese bonds were squeezed as the central bank pulled back a little on its bond buying programme.

U.S., British and European equity futures were broadly steady, with the FTSE, opens new tab and Europe's STOXX 600 set to open near record levels.

MSCI's broadest index of Asia-Pacific shares outside Japan hit its highest since early 2023 in morning trade, before settling back to flat. Japan's Nikkei was edged higher.

Benchmark 10-year Japanese government bond yields rose one basis point to 0.95%, the highest yield since November, and five-year Japanese yields hit 0.555%, the highest since 2011.

The gap, however, with U.S. yields remains hundreds of basis points and wide enough to keep the frail yen under pressure.

A survey released on Monday by the New York Fed showed Americans see inflation a year from now at 3.3%, higher than they did a month earlier, and later on Tuesday U.S. producer price figures will be closely watched.

The main focus this week is on Wednesday's actual U.S. CPI figures, to see whether some upside surprises in the first quarter were a blip or a worrying trend. Expectations are for core CPI to slow from an annual 3.8% in March to 3.6% for April.

"If there was a fourth consecutive upside surprise, that would probably influence the path of future short term interest rates," said Nick Ferres, chief investment officer at Vantage Point Asset Management in Singapore.

"If inflation does not continue the disinflation path, we fear that policy rates have not reached a peak in this cycle," he said.

Also on Tuesday, Alibaba is expected to report results and Federal Reserve Chair Jerome Powell is due to speak at 1400 GMT.

Uber announced a $1.25 billion deal to take over Delivery Hero's foodpanda business in Taiwan. Anglo American laid out a strategy update that includes exploring options for its steelmaking coal, nickel and platinum businesses, as it fends off a takeover bid from BHP.

HANG SENG SURGES
In China, Hong Kong's Hang Seng index is up 30% from January's lows and has surged nearly 20% in a month as money has flowed in steadily from mainland buyers.

Investors have welcomed news China will issue one trillion yuan in special bonds as a harbinger of spending, while weak lending data also shows monetary easing is reaching its limit. Hang Seng volumes last week were the largest in 17 months.
"Some of my clients are asking me every day what to buy, when to buy because they still have an underweight position in Hong Kong stocks," said Steven Leung, executive director at brokerage UOB Kay Hian in Hong Kong.

"I think this situation can continue for a while."

U.S. Treasuries were steady in Asia trade to leave 10-year yields at 4.49% and two-year yields at 4.86%.

In the currency market, nerves and the inflation expectation survey were enough to keep the dollar from falling. Dollar/yen hit its highest since the start of the month, when traders reckoned Japanese authorities were intervening to buy yen.

The yen traded as soft as 156.4 to the dollar. The euro was steady at $1.0786 and the Australian and New Zealand dollars kept to recent ranges, the Aussie at $0.6606 and kiwi at $0.6015.

Australia is expected to announce a budget surplus later on Tuesday, though in the trading day markets focused on company news. Shares in New Zealand construction supplier Fletcher Building fell to 21-year low as it warned of a downturn in home sales.

Oil and gold were broadly steady with Brent crude futures at $83.40 a barrel and spot gold at $2,339 an ounce.