Asian shares rise but mood cautious ahead of event-packed week

Tokyo (Reuters): Asian shares rose on Monday, taking their cue from gains on Wall Street after strong U.S. job data, though the mood was cautious as oil prices plunged to 3 1/2-month lows on fresh worries of oversupply.

A confluence of major events this week including an expected interest rate hike by the U.S. Federal Reserve, a potentially divisive election in the Netherlands and a Group of 20 (G20) finance ministers’ meeting kept many investors on edge.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.9%, while Japan’s Nikkei edged 0.2% higher, led by gains in defensive shares.

European shares are expected to open down slightly, with spread-betters looking at falls of 0.1% in Germany’s DAX and EuroStoxx50.

Global stocks rose on Friday, with the MSCI’s index of 46 markets gaining 0.5%, snapping six straight days of losses after the robust U.S. jobs report.

Solid February U.S. jobs data also made it all but certain that the Federal Reserve will raise rates on Wednesday.

“The markets are focusing on when the Fed will raise rates next time or the pace of its rate hike, so the tone of Fed Chair Janet Yellen will be closely watched,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

U.S. interest rate futures are pricing in about a 50% chance of another rate hike in June. By the end of 2017, a total of nearly three hikes were fully priced in, including the likely move this week.

In a Reuters poll of primary dealers, 12 out of 23 saw a rate increase to 1.00-1.25% by the June 13-14 meeting, while 10 expected such a move by the Fed’s September meeting.

The 10-year U.S. Treasuries yield slipped a tad on Friday, partly as markets had already expected robust payroll figures.

Still, it last stood at 2.574%, not far from its two-year high of 2.641% touched on Dec. 15.

U.S. junk bonds have also faltered, with iShares high yield corporate bond ETF (HYG) last week posting its biggest weekly loss in more than a year.

Global bond prices also came under pressure following a report that some European Central Bank (ECB) policymakers had discussed the possibility of rate hikes before the end of its quantitative easing program.

The 10-year German Bund yield rose to 0.496% on Friday, near its one-year high of 0.498 percent hit in January.

A break of those previous peaks in major bond yields could spark a fresh sell-off in global bond markets.

The talk of an ECB rate hike helped to lift the euro.

The single currency hit a one-month high of $1.0713 on Monday.

On the other hand, worries about the European project could resurface if Wednesday’s parliamentary election in the Netherlands will see the far-right gain more ground than expected.

Polls suggest the far-right ticket will double its vote and its results could affect investor perceptions’ on coming elections in France and Germany this year.

The dollar slipped 0.2% to 114.54 yen from Friday’s seven-week high of 115.51 yen after Commerce Secretary Wilbur Ross said on Friday that Japan will be high on the U.S. priority list for trade agreements.

Traders suspect Washington, keen to reduce its trade deficit, may put pressure on Japan not to cheapen the yen in upcoming bilateral economic talks.

“The G20 will be an important event for the dollar,” said Yoshinori Shigemi, Tokyo-based global market strategist at JPMorgan Asset Management.