* Copper stabilises after recent falls
* U.S. bond yields firm as markets raise rate hike bets
* Valuations at upper end of trading ranges
By Saikat Chatterjee
HONG KONG, March 8 Asian stocks erased early
losses and edged higher on Wednesday as strong China trade data
bolstered bets of a recovering global economy, though gains were
capped by caution ahead of a widely expected U.S. interest rate
hike next week.
China's imports in February grew 44.7 percent from a year
earlier on a yuan-denominated basis, accelerating from the
previous month and leading to a rare trade deficit for the
country. Exports rose 4.2 percent.
That pushed the MSCI's broadest index of Asia-Pacific shares
outside Japan up by a quarter of a percent,
putting it on track for a third consecutive day of gains.
Mainland and Hong Kong stocks led gainers.
European stock futures are pointing to a cautious start.
"We suspect that this largely reflects the boost to import
values from the recent jump in commodity price inflation, but it
also suggests that domestic demand remains resilient," Julian
Evans-Pritchard at Capital Economics said.
The strong trade data reinforced a growing view that
economic activity in China and globally picked up in the first
two months of the year. U.S. dollar-denominated trade figures
from China were expected later in the day.
On Tuesday, key exporter Taiwan reported solid shipments for
the first two months of 2017 while Japan GDP data for the
December quarter was revised higher thanks to increased capex
The Federal Reserve has a policy meeting on March 14-15 and
markets have quickly ratcheted up bets of a rate hike at the
meeting after recent hawkish comments by U.S. policymakers.
Investors have rushed to buy stocks and emerging market debt
this year as they had previously expected the Fed to raise rates
only gradually and as recent data from Asia such as trade have
surprised on the upside, cementing the view of recovering global
But with valuations nearing the top of their historical
trading ranges, some analysts are predicting investors will turn
"While the global economy appears healthier, trade
protectionism concerns remain well and truly alive and the
situation is becoming more complex," said Philip Wee, a
Singapore-based currency strategist at DBS.
Asian stocks remain cheaper versus their U.S. counterparts
but they are approaching the upper end of a historical trading
band on a price-to-earnings basis, according to Thomson Reuters
Hong Kong stocks rose 0.5 percent propped up by the services
sector and extended inflows from the Chinese mainland. Inflows
into Hong Kong stocks from China via two stock connect schemes
have crossed the $7 billion mark so far this year, outpacing ETF
and active flows, Goldman Sachs said.
Bond markets are also scenting a rate hike around the
corner, with 10-year U.S. Treasury yields poised to
break out of a three-month trading range. On Wednesday, it was
at 2.54 percent, compared with 2.49 percent on Friday.
That hasn't stop investors from piling into Asian debt. An
index measuring the yield of a basket of dollar-denominated
bonds from Asian high grade companies held firm at 4.6 percent.
U.S. stocks ended lower on Tuesday, putting the S&P 500 and
the Dow Jones Industrial Average in their first consecutive
sessions of decline in more than a month. E-mini
futures were trading lower in Asia.
"Unless the (U.S.) February payrolls report due on March 10
is an unmitigated disaster, an outcome we do not expect, a
March 15 hike is on the way," Societe Generale strategists said.
Higher yields have brightened the dollar's outlook in recent
days with the greenback changing hands at 113.61 Japanese yen
, compared with 111.75 at end-February though the U.S.
outlook on rates will be a key driver in the coming days.
Commodity markets painted a slightly more cautious picture
with copper prices stabilising after recent sharp falls
while oil prices stuck to recent trading ranges.
Global benchmark Brent fell 0.5 percent to $55.64
(Editing by Jacqueline Wong and Kim Coghill)