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Asian shares tread water, markets eye U.S. inflation signals

Asian shares marked time on Thursday, with China nudging lower, while the U.S. dollar held below an 11-week high as investors reassessed U.S. Federal Reserve statements on inflation and looked to upcoming data for direction.

In early European trades, the pan-region Euro Stoxx 50 futures were up 0.2%, German DAX futures were up 0.1% while FTSE futures were flat. U.S. stock futures, the S&P 500 e-minis, edged up 0.3%.

MSCI's broadest index of Asia-Pacific shares outside Japan was flat at 694.32 points, off a one-month trough of 685.12 touched earlier this week.

Japan's Nikkei was unchanged too at while Chinese shares barely moved with the blue-chip CSI300 index up 0.1%. Australian shares finished 0.5% lower.

On Wall Street, the Nasdaq closed at a record high on Wednesday, while other major U.S. indexes ended lower alongside European stocks. (N)

The market has whipsawed over the last week, feeling the after-effects of a surprise projection for rate increases as soon as 2023 by the U.S. Federal Reserve which knocked stocks, boosted the dollar and led to the flattening of the U.S. bond yield curve.

Investors are now pricing the first full U.S. interest rate rise for February 2023 compared to December 2022 in the immediate aftermath of the Fed meeting.

Overnight, 10-year Treasury yields remained below 1.5% in muted trading.

"Until bond yields break out in a sustainable fashion, in either direction, it remains very hard to determine which direction stocks are headed in over the near term," JPMorgan (NYSE:JPM) analysts wrote in a note.

"Much continues to hinge on the upcoming growth data."

Europe released strong manufacturing activity data on Wednesday, while figures on ISM manufacturing and U.S. non-farm payrolls are due next week.

The U.S. dollar vacillated below an 11-week high versus major peers as traders navigated conflicting signals from Fed officials on the timing of a withdrawal of monetary stimulus.

On Wednesday, two Fed officials said a period of high inflation in the United States could last longer than anticipated, just a day after Fed Chair Jerome Powell played down rising price pressures.

The dollar index, which measures the greenback against six rivals, was treadig water at 91.772. It was at 92.408 at the end of last week, the highest since April 9.

Against the Japanese yen, the dollar climbed to a 15-month high of 111.11. It was last slightly weaker at 110.76.

The Bank of England is expected to acknowledge the strength of inflationary pressures in recent data when it meets later in the day.

"We do not expect the statement to push back against expectations that interest rates could start to move higher in the second half of next year," ANZ economists said.

The British pound was steady at $1.3959.

Flash U.S. manufacturing PMI climbed to a record high in June, but manufacturers are still struggling to secure raw materials and qualified workers, substantially raising prices for both businesses and consumers.

Early PMI data showed that euro zone business growth accelerated at its fastest pace in 15 years in June on the easing of more lockdown measures and the unleashing of pent-up demand.

Oil prices hovered near two years high after an industry report on U.S. crude inventories reinforced views of a tightening market as travel picks up in Europe and North America.

Brent crude futures was rose 16 cents at $75.35 a barrel and U.S. crude jumped 15 cents to $73.23 per barrel.

Spot gold prices dipped to $1,776.2 an ounce.

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