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SYDNEY (Reuters) – Asian shares advanced on Monday as investors breathed a sigh of relief after encouraging Chinese data suggested the world’s second-biggest economy may be starting to stabilize thanks to ramped-up stimulus from Beijing.

The positive mood appeared likely to spread, with early European trades showing the pan-region Euro Stoxx 50 futures up 0.1%. Futures for Germany’s DAX and France’s CAC 40 rose 0.1% each while FTSE futures were flat. E-minis for the S&P500 added 0.1%.

Second quarter economic growth slowed to 6.2% from a year earlier, the weakest pace in at least 27 years while separate data showed the country’s industrial output and retail sales handily topped forecasts.

The promising monthly activity data suggested a flurry of stimulus measures from China have been able to prop-up domestic growth and offset some of the damage from a protracted trade war with the United States, analysts said.

Equity markets were choppy in the wake of the Chinese data as some expected Beijing might temper further stimulus.

MSCI’s broadest index of Asia-Pacific shares outside Japan reversed earlier losses to be 0.2% higher. It fell a little more than 1% last week, ending five straight weeks of gains.

Trading was light on Monday as Japan was shut for a public holiday.

Chinese shares were down before Monday’s data release, after which they pared losses and then produced gains for the day. The blue-chip index gained 0.4% for the day. Hong Kong’s Hang Seng index was up 0.2%.

Australian shares lost 0.7% while South Korea’s KOSPI slipped 0.2%.

“Investors may be scaling back easing expectation upon today’s data as fiscal measures appear to be working,” said Westpac analyst Frances Cheung.

“That said, we believe the PBoC will still be supportive of liquidity. Expect yields to be stable and any temporary bearishness to be expressed via swaps.”

Later in the week, U.S. retail sales and industrial production data will provide clues about the health of the world’s largest economy. The U.S. Federal Reserve will release its ‘Beige Book’ on Wednesday, which investors will scour for comments on how trade tensions were affecting the business outlook.

In currency markets, the Australian dollar, often played as a liquid proxy for the Chinese yuan, jumped after the data to a high of $0.7033, a level not seen since July 4. It was last up 0.2% at $0.7030.

The greenback was barely changed at 96.841 against a basket of major currencies. The dollar index fell for three days in a row as markets fully priced in the chance of a 25-basis-point (bps) cut to U.S. interest rates. There is also a small probability of a 50 bps cut.

Against the Japanese yen, the dollar ticked up from near the lowest since early June at 108.01 while the single currency paused at $1.1272 after three successive sessions of gains.

Expectations that the Fed will keep rates supportive have sent bonds rallying with yields on ten-year U.S. Treasuries now below the current Fed rate range of 2.25%-2.50%. <0#FF:>

“Dovish Fed rhetoric has rendered a July rate cut, in the market’s eyes, as a fait accompli: it’s not if they cut but by how much,” Morgan Stanley strategist Hans Redekar told clients in a note.

Redekar said the bank was re-entering its short dollar/long yen position.

“If markets are disappointed, the yield curve would likely flatten, the USD strengthen, and financial conditions tighten. These forces would exacerbate the already considerable headwinds facing the global economy,” he added.

“Global reflation requires a weaker USD to bolster global trade and commodity prices.”

Worries about world growth, low inflation and ongoing Sino-U.S. trade tensions have meant investors are piling money onto bonds and money market funds, Jefferies said, citing its global asset fund flows tracker.

“The danger is that with a mountain of cash parked in money market funds any trade ceasefire would cause a huge shift away from safe assets,” said Sean Darby, Jefferies’ global equity strategist.

“Presently, investors don’t seem to be in any particular rush to buy equities – earnings revisions have yet to bottom out while economic surprises have been rare,” he added.

“The bottom line is that we would issue a pause on the risk rally.”

In commodities, U.S. crude fell 21 cents to $60 a barrel. Brent crude was off 10 cents at $66.62.

Gold slipped to 1,414.25 an ounce, drifting away from a recent six-year top of $1,438.60.

SHANGHAI (Reuters) – Asian shares steadied on Monday as investors caught their breath following another week of escalating U.S.-China trade tensions, with sentiment turning brighter after the United States said it would lift tariffs in North America.

MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.6%, reflecting modest gains in markets across the region after the broad index finished at its lowest since Jan. 24 on Friday, down 3% for the week.

Australian shares underpinned the market’s firmer mood, jumping 1.7% after the center-right Liberal National Coalition pulled off a shock win in federal elections, beating the left-wing Labor Party.

Election results also look set to lift markets in India. India’s NSE Stock Futures listed in Singapore rose 2.4% and the rupee strengthened after exit polls showed Indian Prime Minister Narendra Modi is likely to return to power with an even bigger majority in parliament.

Shares in the trade-sensitive markets of South Korea and Taiwan also rose. The Taiwan SE Weighted Index added 0.3% and Seoul’s KOSPI rose 0.6%.

U.S. S&P 500 e-mini futures also turned higher, rising 0.3% following losses on Wall Street on Friday.

“We’ve had such a volatile few days in terms of pronouncements and interpretations of what’s going on with this potential trade war. And I think the news bites that we had over the weekend seem to indicate a softening of Trump’s approach toward tariffs internationally,” said Jim McCafferty, head of equity research, Asia ex-Japan at Nomura.

The U.S. announced on Friday that it would remove tariffs on Canadian steel and aluminum, prompting Canada’s foreign minister to vow the quick ratification of a new North American trade agreement.

“I think people might take the view that perhaps a similar strategy might be applied to Asia,” McCafferty said, referring to the lifting of tariffs.

The cautious optimism failed to lift Chinese blue chips, which fell 1%.

Japan’s Nikkei stock index added 0.3%, after data showed growth in the world’s third-biggest economy unexpectedly accelerated in the first quarter.

Modest gains on Monday came even as financial markets remained on edge over the intensifying Sino-U.S. trade war, with the Trump administration last week adding Huawei Technologies Co Ltd to a trade blacklist.

The repercussions of that move were evident as Alphabet Inc’s Google suspended business with Huawei that requires the transfer of hardware, software and technical services except those publicly available via open source licensing.

Google’s suspension of business with Huawei “signals that even though the trade talks are being characterized as being stalled, when we factor in China saying there is no point (in) U.S. negotiators coming to Beijing in current circumstances as they did Friday, then the chance of a G20 deal seem more remote,” Greg McKenna, strategist at McKenna Macro said in a note to clients.

Noting the festering trade war, continued uncertainty over Brexit and rising tensions between the United States and Iran, McKenna said investors are currently “headline trading.”

“(It’s) too soon to see the economic consequences of the battle escalating. And so belief can be suspended until that time,” he said.

OIL JUMPS

Rising tensions in the Middle East, which have supported oil prices, ratcheted up another notch on the weekend as U.S. President Donald Trump issued new threats, tweeting that a conflict with Iran would be the “official end” of that country.

But it was comments from Saudi Arabia’s energy minister that had the most immediate effect on crude prices on Monday.

Saudi Energy Minister Khalid al-Falih said that there was consensus among the members of the Organization of the Petroleum Exporting Countries to maintain production cuts to “gently” reduce inventories.

Both U.S. crude and Brent crude jumped more than 1.4% following the minister’s comments, with West Texas Intermediate fetching $63.66 a barrel and Brent crude at $73.27 per barrel.

In currency markets, China’s offshore yuan rebounded after touching its weakest against the dollar since November on Friday. It was last trading at 6.9351 per dollar.

In onshore trading on Friday, the yuan had weakened past the psychologically important 6.9 per dollar level to end at its softest in 19 weeks. However, sources told Reuters the country’s central bank is expected to use foreign exchange intervention and monetary policy tools to stop it weakening past the 7-per-dollar level in the near term.

The People’s Bank of China said on Sunday that it would maintain basic stability of the yuan exchange rate within a “reasonable and balanced range.”

The onshore yuan strengthened to 6.9081 per dollar on Monday.

The dollar added 0.12% against the yen to 110.20, while the euro was barely changed at $1.1155. The dollar index, which tracks the greenback against a basket of six major rivals, was up a hair’s breadth at 98.018.

The yield on benchmark 10-year Treasury notes rose to 2.4015% compared with a U.S. close of 2.393% on Friday, while the two-year yield touched 2.2146%, up from Friday’s U.S. close of 2.202%.

Gold trimmed earlier gains on the modest revival in risk appetite, easing to $1,276.91 per ounce.