GLOBAL MARKETS-Asian shares stall, dollar steadies

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GLOBAL MARKETS-Asian shares stall, dollar steadies

SINGAPORE Reuters- Asia's stock markets struggled to carry recent gains into a fourth straight session on Wednesday and the U.S. dollar steadied, as doubts about inflation and the drag from rate rises crept back into the global growth outlook.

MSCI's broadest index of Asia-Pacific shares outside Japan gave up earlier gains to trade around flat by mid-morning. Japan's Nikkei went up 0.3%, but miners helped Australian shares increase by 0.7%.

Overnight Wall Street indexes had jumped and the dollar was recovering from near two-decade highs as investors pushed the fear of inflation and recession to the back of their minds.

But analysts doubted it would last and by the time Asian traders had woken up the U.S. stocks had run out of steam. S&P 500 futures were down 0.2% early in the Asia session, while Nasdaq futures were down 0.4%.

After plunging into last week, shares could have a longer near-term bounce, said Shane Oliver, chief economist and head of investment strategy at Australia's AMP Capital.

The war in Ukraine and Chinese growth continue to be high and there is still more downside to share markets, he said.

The dollar was steady after an overnight kicking, helped by Australian wages data missing forecasts that pulled down the Aussie dollar.

The dollar remained steady on the euro at $1.0536 and paused a strong bounce for sterling at $1.2480. The dollar index was at 103.370.

It's still too early to call for a long term peak in the dollar and retracements should be shallow, according to analysts at Westpac. They said that there was a possibility that there will be a two-way consolidation between 102 -- 104 in the near-term.

The positive data had helped the short-term mood, with U.S retail sales meeting forecasts for a solid increase in April and industrial production beating expectations.

On Wednesday, Japan's quarterly data showed that it was smaller than expected by traders.

The vice-premier of China made soothing comments to tech executives in the latest sign of a let up in pressure, as Shanghai is moving towards an end to its lockdown.

The reminder from Federal Reserve Chair Jerome Powell that controlling inflation would cause inflation to rise and possibly cause some pain, however, was offset by the good news.

The benchmark Fed funds rate is set to drop 3% by early next year, and investors have priced in 50 basis point U.S. rate hikes in June and July.

In anticipation of rising rates, treasuries of all tenors were sold overnight, but the gap between short-dated and long-dated bonds is narrowing as markets price in the risk that the rate hikes this year will drag on longer-run growth. The yield was just below 3% at 2.9805 and the US benchmark 10 year Treasuries were steady in Asia.

The European yields are rising as the likelihood of the European Central Bank hiking rates by 25 basis points around July is firm. Klaas Knot, the Dutch central bank chief, said overnight that a bigger rise shouldn't be ruled out.

Commodities rallied with stocks this week as markets had found reasons to hold out growth hopes, but oil dipped overnight and there were signs of waning momentum on Wednesday.

The price of crude oil rose 0.3% to $112.29 a barrel, and the U.S. crude futures rose 0.8% to $113.35 a barrel.

S&P Global Ratings cut growth forecasts for China, the United States and the eurozone.

The global economy continues to face an unusually large number of negative shocks, according to chief economist Paul F. Gruenwald.

He said that two developments have altered the macro picture, namely Russia's invasion of Ukraine, which has caused commodity prices to spike and inflation, which has turned out to be higher, broader and more persistent than first thought.