Asian stocks rose on Monday, with Chinese bank stocks getting a boost on hopes lending will stay strong, while U.S. Treasury yields were flat before a weekly record of $104 billion in new debt hits the market.
The U.S. dollar and yen rose on caution ahead of a Federal Reserve meeting this week, when policymakers may extend programmes to keep borrowing costs low, with government bond yields still broadly in a rising trend.
Major European stocks were expected to open lower, financial bookmakers said, hurt by weakness in resource-related shares as commodity prices slide on uncertainty about future demand.
Until markets gain a clearer picture of the Fed's intentions and its views on the nascent recovery, dealers would likely keep asset markets in narrow ranges, taking profits on small price rises.
The Fed needs to find a balance between not killing the recovery through rate hike hopes, while at the same time not over-committing on keeping rates low, Ashley Davies, currency strategist with UBS in Singapore, said in a note.
Equity markets mostly climbed, with buying concentrated in the telecommunications, technology and financial sectors.
The MSCI index of Asia Pacific stocks outside Japan rose 1 percent and is up 52 percent since a global equity rally began on March 9.
Throughout Asia, the technology and consumer discretionary sectors have had the sharpest increase in 12-month forward earnings expectations in the last 30 days, according to data from Thomson Reuters via Starmine Professional.
The consumer discretionary sector was also the most expensive, on a forward price-to-earnings basis.
Japan's Nikkei share average <.N225> finished 0.4 percent higher, and is up 38 percent since March 9.
Hong Kong's Hang Seng index <.HSI> rose 2.5 percent, with banks and property-related shares providing the main boost. Chinese banks were boosted by news suggesting credit in China remained abundant.
Centralised infrastructure projects helped generate loan growth of 6.5 trillion yuan ($951 billion) in the first half of this year, the Shanghai Securities News reported.
The ICE Futures U.S. dollar index <.DXY>, a gauge of its value against a basket of six other major currencies, rose 0.2 percent, but remained in a range carved out in the last month.
The Australian dollar was one of the biggest movers on the day, falling 0.8 percent against the dollar to US$0.7999 and 0.9 percent against the yen to 76.80 yen as metals prices fell on concern Chinese restocking could soon wind down.
China's imports of refined copper hit a record in May, up from a previous record in April and were 258 percent higher than a year earlier. However, speculation spread that the pace of demand was unsustainable, and copper for delivery in three months on the London Metal Exchange fell $159 to $4,866 a tonne.
A FINE BALANCE
U.S. Treasuries were trading largely unchanged, with the benchmark 10-year yield at 3.80 percent.
The Fed will have to strike a fine balance when it releases a statement at the end of a two-day meeting on Wednesday.
While many analysts do not expect the Fed to increase the $300 billion in planned purchases of Treasuries, $200 billion in U.S. agency debt and $1.25 trillion in agency mortgage-backed securities, they also do not think policymakers will break new ground with regard to exiting programmes to keep interest rates low.
The worst of the financial crisis has likely passed, though the direct purchases of government and mortgage-related debt have had a somewhat limited impact, with the 30-year mortgage rate up some 70 basis points in the last month.
Oil fell toward $69 a barrel, extending the previous session's drop of more than 2 percent, as bearish sentiment over gasoline markets in the United States continued to dominate investors' concerns.
In May, the market was pricing in that there would be a gasoline shortage but the latest data is obviously showing that it is not happening, said Ben Westmore, a commodities analyst at the National Australia Bank.
There are also high stockpiles of crude oil, so the general market sentiment is that the balance of demand and supply in the market hasn't improved too much.
U.S. crude for July delivery fell 12 cents to $69.43, after tumbling $1.82 on Friday, posting a weekly loss of more than 3 percent. London Brent crude was flat at $69.19.