Asian shares rally, U.S. infrastructure bill progresses

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An investor looks at an electronic board showing stock information at a brokerage house in Beijing, August 27, 2015. REUTERS/Jason Lee/File Photo

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  • Asian stock markets :
  • Nikkei bounces off 7-mth lows, China shares rally for now
  • U.S. stock futures firm as earnings beat expectations
  • Senate looks to pass infrastructure deal; payrolls ahead

SYDNEY, Aug 2 (Reuters) - Asian shares recouped some of their recent steep losses on Monday as beaten-down Chinese markets drew retail bargain hunters, while stellar U.S. earnings and progress on an infrastructure bill supported Wall Street futures.

There was the prospect of more fiscal stimulus ahead as U.S. senators worked to finalise a sweeping $1 trillion infrastructure plan that could pass this week. read more

That helped S&P 500 futures and Nasdaq futures both added 0.5%. EUROSTOXX 50 futures also gained 0.5%, while FTSE futures put on 0.4%.

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Australian stocks hit a record (.AXJO), helped by Square Inc's (SQ.N) $29 billion bid for buy now, pay later (BNPL) pioneer Afterpay Ltd (APT.AX). read more

MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was last up 0.8%, having hit its low for the year so far last week.

Japan's Nikkei (.N225) bounced back 1.8%, but that was from its lowest since January.

Even Chinese blue chips enjoyed a 2% bounce (.CSI300), having shed 5.5% last week, though Beijing's crackdown on the tech and education sectors hammering stocks still reverberated.

"The 10-15 year period where foreign investors were allowed to participate in the walled garden of Chinese high growth stocks was an aberration," said BofA economist Ajay Kapur.

A shift in China's regulatory regime was underway that held implications well beyond the tech sector, he said.

"Regulatory tightening in the world's second largest economy intended to reduce inequality and make housing and goods more affordable is deflationary, something that the many bond bears need to consider."

China's economic problems were highlighted by surveys showing factory activity slowing sharply in July amid rising costs and extreme weather. read more

In contrast, Europe's economic recovery outpaced all expectations last quarter, while U.S consumers spent with abandon in June as coronavirus restrictions eased, a trend likely to ensure a strong payrolls report at the end of this week.

"Surging company profits in the U.S. and lower bond yields are providing support, and in any case the rising trend in shares is likely to remain in place into next year as rising vaccination rates allow economic recovery to continue," said Shane Oliver, chief investment strategist at AMP Capital.

About 89% of the nearly 300 recent U.S. earnings reports have beaten analysts' profit estimates. Earnings are now expected to have climbed 89.8% in the second quarter, versus forecasts of 65.4% at the start of July.

Equity valuations have also been supported by a steady decline in bond yields, with yields on U.S. 10-year notes falling for five weeks in a row to reach 1.22%.

That drop combined with surprisingly strong EU economic data out on Friday to lift the euro to $1.1872 , and away from its July low of $1.1750.

The dollar has also drifted off to 109.67 yen , from its recent top of 110.58, but has support around 109.35. As a result, the dollar index has eased to 92.110 , from a July peak of 93.194.

The drop in bond yields and the dollar gave gold a fillip last week but it again faltered at resistance around $1,811 and was last trading flat at $1,811 an ounce .

Oil prices eased on Monday as the soft Chinese data undermined the outlook for demand, though that follows four straight months of price gains.

Brent was last down 79 cents at $74.62 a barrel, while U.S. crude lost 68 cents to $73.27.

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Editing by Kenneth Maxwell, Simon Cameron-Moore and Kim Coghill

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