Asian share markets turned mixed on Monday as US lawmakers struggled to hammer out a new stimulus plan amid a global surge of new coronavirus cases, though a squeeze on crowded short positions gave the dollar a rare bounce.
Wall Street's main indexes were set to open higher on Monday as Microsoft's pursuit of TikTok's USA operations and a clutch of upbeat quarterly earnings reports lifted sentiment in the absence of a fiscal coronavirus relief deal.
Index heavyweight HSBC fell 5 per cent after it warned that its bad debt charges could surge to as much as $13 billion.
E-Mini futures for the S&P 500 ESc1 were little changed, with investors nervous about the lack of a new stimulus package in the United States and White House Chief of Staff Mark Meadows not optimistic about a deal.
On Friday, Fitch Ratings cut the outlook on the United States' triple-A rating to negative from stable, citing eroding credit strength and a ballooning deficit.
The credit score company likewise stated the future instructions of USA financial policy depends in part on the November election and the resulting makeup of Congress, warning there is a danger policy gridlock might continue.
Dallas Fed President Robert Kaplan discusses the USA economy at Thursday event. Apple's overtaking of Saudi Aramco 2222.SE on Friday to become the world's most valuable company also helped fuel the tech rally.
In Asia on Monday, China's factory activity data showed the fastest pace of expansion in almost a decade.
China's manufacturing data helped blue chips .CSI300 rally 1.6%, offsetting worries about U.S.
Japan's Nikkei meanwhile added 2.2 per cent, courtesy of a pullback in the yen. Australia's and South Korea's stocks fluctuated, as did S&P 500 contracts.
That took a heavy toll on the US dollar which suffered its worst monthly drubbing in a decade in July, though it was attempting a rally on Monday as bears took profits on crowded short positions.
"Amid improvements in business sentiment, signals are emerging that the initial boost from pent-up demand is fading and consumer confidence is slipping lower", economists at Barclays wrote in a note.
"Together with concerns about labor market and virus developments, this clouds the outlook and could be exacerbated if USA fiscal support is not renewed in time".
The 10-year real rate has broken below -1% for the first time amid a marked flattening of the yield curve as investors wager on yet more accommodation from the Federal Reserve.
The yield on 10-year Treasuries gained three basis points to 0.56%.The yield on two-year Treasuries advanced less than one basis point to 0.11%.Britain's 10-year yield declined less than one basis point to 0.103%.Germany's 10-year yield climbed one basis point to -0.52%. German government bond yields rose slightly to -0.527 per cent.
The dollar was last at $1.1755 per euro EUR=, after the single currency gained 4.8% in July to stretch as far as $1.1908. Against a basket of currencies, the dollar stood at 93.566 having touched its lowest since May 2018 on Friday at 92.538.
The dollar was a shade lower on the Japanese yen at 105.80 after hitting a 4-1/2-month low last week at 104.17.
Other major currency pairs were largely unchanged.
It hit $1,984 an ounce XAU= early on Monday and seemed on track to take out $2,000 soon.
Brent crude LCOc1 futures dipped 46 cents to $43.06 a barrel, while US crude CLc1 eased 51 cents to $39.76.