Asia shares edge higher as China data beat forecasts By Reuters

By Wayne Cole

SYDNEY (Reuters) – Asian shares edged higher on Monday as Chinese economic data surprised on the high side, challenging wagers the economy was stuck in a downturn although a decline in mainland house prices was a worry.

Annual growth in retail sales and industrial output both handily beat forecasts, with the bounce in consumption a positive given pandemic restrictions.

On a negative note for the stressed housing market new home prices in China fell 0.2% month-on-month in October, the biggest decline since February 2015.

Economists at CBA argued there was a chance the People’s Bank of China would cut bank reserve requirements (RRR) this week to support activity.

“We estimate a 50 basis point cut to the RRR can release CNY 1 billion of liquidity,” they said in a note “In our view, mild easing measures can help meet funding requirements for property developers and offset downside risks to the economy.”

Chinese blue chips were steady on the data, while MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.4%, after popping higher late last week.

gained 0.5% as data showing economic activity shrank by more than expected in the third quarter only reinforced the case for aggressive fiscal stimulus.

Elsewhere, the U.N. climate conference in Scotland managed to hammer out a deal on emissions, but only by watering down a commitment to phase out coal.

Wall Street eased last week to break a string of gains, though the major indices were only a shade off all-time highs. firmed 0.1% in early trade on Monday, while Nasdaq futures added 0.2%.

A key release this week will be U.S. retail sales on Tuesday for any impact from the drop in consumer sentiment to a decade low reported for November as people fretted over higher prices, particularly for petrol.

There are also doubts about whether firms have the pricing power to maintain margins in the face of rising costs.

Analysts at BofA noted 75% of U.S. companies had beaten earnings estimates in the latest reporting season but forecasts for the fourth quarter were only flat, breaking more than a year of rising expectations.

The grim survey helped Treasuries steady a little, but yields were still up a hefty 11 basis points for the week as the market priced in a greater risk of an early tightening by the Federal Reserve.

BofA economist Ethan Harris suspects the market still has not priced in enough given the high starting level of inflation means rates need to rise more to reach neutral.

“If inflation stays high and comes in above the planned overshoot, the Fed will need to become much more hawkish and either accept a market correction or deliberately induce such a correction,” warns Harris.

Higher U.S. yields have combined with general risk aversion to…