Asia stocks wait on Sino-US talks, China trade data

By Wayne Cole

SYDNEY (Reuters) - Asian stock markets started in a cautious mood on Thursday as investors hoped for progress in the latest Sino-U.S. tariff talks while bracing for China trade data that are expected to show further falls in both exports and imports.

There was some hope another U.S. government shutdown would be averted as President Donald Trump edged toward backing a deal in Congress on funding for a border barrier.

MSCI's broadest index of Asia-Pacific shares outside Japan was all but flat, having just touched peaks last seen in early October.

Japan's Nikkei edged up 0.3 percent to its highest for the year so far as a weakening yen boosted export stocks. E-Mini futures for the S&P 500 added 0.1 percent.

Chinese stocks were grabbing attention after the Shanghai blue chips index jumped 2 percent on Wednesday to levels last seen in late September.

With Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer in Beijing for high level talks, investors were daring to hope for good news.

Trump said on Wednesday the talks with China were "going along very well" as they try to resolve the tariff dispute ahead of a March 1 deadline.

"Investors are once again cautiously optimistic that progress will be made and realistically an extension of the tariff deadline will be seen as a good result," SAID Nick Twidale, chief operating officer at Rakuten Securities.

"Longer term, only evidence of a solid deal going forward will dispel the investor caution and global growth fears that have been such a feature over the last year."

Data showing U.S. consumer price inflation rose at the slowest annual pace in more than 1-1/2 years supported speculation the Federal Reserve could stay patient on rates and helped lift Wall Street.

The Dow ended Wednesday up 0.36 percent, while the S&P 500 gained 0.30 percent and the Nasdaq 0.26 percent. [.N]

DOLLAR BEST OF BAD BUNCH

In currency markets, the improvement in risk appetite undermined the safe haven yen and propelled the dollar to its best levels of the year so far at 111.04.

The euro took a hit of its own from dire data on European industrial output which pushed long-term market inflation expectations to new lows, while putting downward pressure on bond yields in the bloc.

The single currency was last at $1.1259 and testing the floor of a $1.1213/1.1570 trading range that has held since mid-October.

Sterling was also on edge at $1.1846 ahead of another parliamentary vote on British Prime Minister Theresa May's Brexit plan.

All of which left the dollar firm on a basket of currencies at 97.243, near its highest since mid-December.

The dollar's gains kept gold restrained at $1,307.15 per ounce.

Oil prices found support as top exporter Saudi Arabia said it would cut crude exports and deliver an even deeper cut to its production. [O/R]

U.S. crude was last up 10 cents at $54.00 a barrel. Brent crude futures were yet to trade at $63.61.

(For a graphic on Asian stock markets, click here https://tmsnrt.rs/2zpUAr4)

(Editing by Shri Navaratnam)