Asian markets down as data shows China trade weak

Asian share markets were mostly weaker on Tuesday as investors digested weaker Chinese trade data ahead of key inflation readings from China and the United States to deliver an updated outlook on the health of the global economy.

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.7% on Tuesday, after US stocks ended the previous session with mild gains. The index is down 2.9% so far this month.

The yield on benchmark 10-year Treasury notes US10YT=RR rose to 4.0885% compared with its US close of 4.078% on Monday. The two-year yield, which rises with traders' expectations of higher Federal Reserve fund rates, touched 4.7682% compared with a US close of 4.758%.

Data showed China's imports contracted at 12.4% in July, missing forecasts for a drop of 5%, while exports fell 14.5%, compared with a fall of 12.5% tipped by economists.

Hong Kong's Hang Seng Index .HSI started to recover some ground lost earlier in the day, but was still down 1.26% after opening 1.73% in the red.

Sentiment rebounded in China as the blue chip CSI300 index .CSI300 turned positive to be up 0.07% after initially losing 0.54%.

Australian shares were up 0.15%, while Japan's Nikkei stock index .N225 rose 0.29% after early trading up by nearly 0.8%.

The mixed day in Asia follows a stronger night in US markets.

On Wall Street, the Dow Jones Industrial Average rose 1.16%, the S&P 500 gained 0.90% and the Nasdaq Composite added 0.61%.

Global investors are keenly awaiting inflation readings from China on Wednesday and the US on Thursday, expecting them to show stark differences in price movement in the world's two biggest economies.

US inflation likely accelerated slightly in July to an annual 3.3%, while the core rate was likely unchanged at 4.8%, according to a Reuters poll of economists. ANZ predicts China's July consumer price index to come in at minus 0.4% year-on-year.

"The Fed is wary of upside risks to elevated inflation given demand for labour remains excessive, and most policy makers think the policy rate will need to be kept restrictive," ANZ economists wrote on Tuesday.

"Weak inflation in China should be a global disinflationary force in goods markets going forward."

The prospect of economic stimulus from China's central government to reinvigorate a soft economy is still being contemplated by investors. Minor measures to help property markets have been delivered in the past fortnight, but no broad stimulus has been outlined.

"While awaiting ominous signs of deflation, markets are torn between economic gloom and hopes of resounding stimulus that is set to re-ignite China's growth," Mizuho economists said.

"We are however unconvinced that Beijing's stimulus efforts will achieve intended 'lift-off' for the still struggling economy."

The dollar rose 0.54% against the yen at 143.26 JPY=. It is still some distance from its high this year of 145.07 hit on 30 June.

The European single currency EUR= was down 0.2% on the day at $1.1002 while the dollar index =USD, which tracks the greenback against a basket of currencies of major trading partners, was up at 102.29.

US crude CLc1 ticked up 0.21% to $82.11 a barrel. Brent crude LCOc1 rose to $85.46 per barrel.

Gold was slightly lower with the spot price XAU= at $1934.1667 per ounce.