Asia shares rise as yield hunt drives record flows, China data awaited

By Wayne Cole

SYDNEY (Reuters) - Asian shares stood atop one-year peaks on Tuesday as a desperate search for yield drove a record inflow into emerging market funds, while oil prices tried to sustain their latest bounce.

Analysts at Bank of America Merrill Lynch noted the search for yield had led to the largest 5-week inflow on record to emerging market debt funds and the longest inflow streak to equity funds in two years.

MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.1 percent having already risen for three sessions in a row.

Japan's Nikkei <.N225> was also attempting a fourth session of gains with an early rise of 0.1 percent, while South Korea firmed 0.2 percent.

The major data release in Asia will be Chinese inflation due around 0130 GMT . Forecasts are for a slight tick down to 1.8 percent in July, a benign result that would confirm there was plenty of scope for further policy easing.

Figures out on Monday showed Chinese trade flows disappointed in July as it suffered from slack demand both at home and abroad.

"Looking ahead, the launches of new electronic products may provide temporary support to export growth in the near term, but the overall outlook remains cloudy," wrote Jing Li, an economist at HSBC in a note.

"More importantly, weakening imports, which largely reflected the fragile nature of domestic demand, strengthens the call for more growth-supportive policies."

On Wall Street, the Dow fell 0.08 percent, while the S&P 500 lost 0.09 percent and the Nasdaq 0.15 percent. Befitting the minor moves, it was one of the year's slowest sessions as a sub-average number of shares traded.

In currencies, the dollar consolidated the moderate gains made in the wake of Friday's upbeat U.S. payrolls report. Against a basket of currencies, the dollar was steady at 96.358 and up from last week's trough of 95.003.

It edged up to 102.35 yen , and away from the recent low of 100.65, while the euro dipped to $1.1081 .

Futures markets <0#FF:> now imply around a 54 percent chance of a Federal Reserve hike in December, though it was notable that a move was not fully priced in until October next year.

That outlook is in marked contrast to much of the rest of the world where stimulus is still very much in vogue. The UK and Australia both cut rates last week and New Zealand is widely expected to ease on Thursday.

Oil prices were just a shade softer on Tuesday having rallied 3 percent overnight amid renewed speculation that OPEC would try to restrain output.

U.S. crude edged back 16 cents to $42.86 per barrel, while Brent crude fell 17 cents to $45.22.

(Reporting by Wayne Cole; Editing by Eric Meijer)