By Alun John

HONG KONG, (Reuters) – Asian shares rose on Wednesday after dipping to close to the two-year lows reached in the previous session. The dollar held steady ahead of eagerly awaited U.S. inflation figures that will provide a clue as to the Fed’s willingness to raise interest rates.

MSCI’s Asia-Pacific broadest index, other than Japan, rose 0.45%. This was slightly above the level it touched on July 20, 2020. Gained 0.3%

The gains were led by Chinese blue chips, which rose 1.5% following the slowest annual increase in producer prices for the second-largest economy in the world in April. This leaves room for additional stimulus in order to support an economy under pressure due to COVID-19 restrictions.

China’s economy has been negatively affected by strict curbs on coronavirus control. According to Nomura analysts, currently 41 Chinese cities have implemented partial or full lockdowns, or other district-based measures of control, as of Tuesday.

They estimated around 289.8 million people are currently affected by these lockdown measures in regions that account for around 33.8 trillion yuan ($5.02 trillion) of China’s total GDP, down moderately from last week’s 327.9 million people and 35.4 trillion yuan.

The main event of the day will be the U.S. Inflation Data, scheduled for 12.30 GMT. This will provide an indication as to whether or not the U.S. Federal Reserve is going to raise interest rates more aggressively in order combat inflation.

Last week, the Fed raised its overnight lending target by half a point. Chair Jerome Powell stated that two additional rate increases are possible at U.S. central banks’s upcoming policy meetings.

In markets, there has been some speculation that the Fed might need to raise its benchmark rate by 75 basis points at one meeting.

This has pushed the yields on U.S. Treasury bonds higher and helped to support the dollar.

CBA analysts stated in a note, “A positive surprise (in CPI) will incite markets to support dollar and increase pricing for 75pt increases in the Funds rates later in this year.”

Analysts predict that the U.S. Consumer Price Index will show a significant pullback in monthly growth from 1.2% March to 0.2% April.

Also, they predict an annual rise of 8.1%. This is 0.4 percentage points lower than the previous 8.5%. It was also the most recent reading since December 1981.

The greenback was measured against six major peers at 103.86. It is still not far off the record of 104.49, set at the beginning the week.

Wall Street’s overnight mood was mixed. While the Nasdaq gained 0.98%, the lost 0.25% and the Nasdaq fell 0.26 percent.

U.S. Treasuries were quiet as well ahead of data. After falling overnight from its three-year peak, the benchmark 10-year note yield remained steady at 2.899%.

At 2.68%, the U.S. yield on two years, which is often indicative of Fed rate outlooks, was very little affected at the front.

After falling to below $30,000 Tuesday, the stock was back in $31,400. This is its first recovery since July 2021.

The previous day, oil rebounded from its declines.

The price of a barrel rose by 1% to $100.03, after falling below $100 for the first week in a row. The price of a barrel rose 1.1%, to $103.58.

1.1% decrease in price to $1836.6 per ounce

($1 = 6.7338 yuan)