Asian stocks lifted by firmer oil prices; dollar steady

Asian stocks crept up on Tuesday thanks to a rebound in oil prices and the dollar consolidated recent gains although underlying risk appetite was cautious on concerns over capital outflows and weak data, especially from China.

Special focus will be on China's B Share market, which was trading up around 0.8 percent on Tuesday after tumbling more than 6 percent on Monday on concerns of extended yuan weakness.

MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.5 percent in early trade. Australia's benchmark index was up 0.4 percent while Hong Kong shares were poised to open higher.

"The Hong Kong markets should find some support around current levels though the weak outlook from the telecom and the property sector and continued concerns of yuan weakness will prevent any sharp gains," said Alex Wong, a portfolio manager at Ample Capital with $100 million in assets under management.

As campaigning for the U.S. presidential elections enters its home stretch and concerns about the Chinese economy deepen after last week's weak trade data, risk aversion is broadly on the rise - forcing investors to cut positions after a strong rally in risky assets in the third quarter of 2016.

Daily portfolio flows to emerging markets declined sharply last week with the seven-day moving average declining to its lowest level since a surprise Chinese currency devaluation in August 2015, according to data from Institute of International Finance.

"It's been an incredibly quiet start to the week as most currencies remain range bound but don't let this sense of calm fool you as markets may be poised to explode," said Stephen Innes, a senior trader at FX broker OANDA, referring to a multitude of macro-economic risks on the horizon.

Adding to the headwinds for emerging markets is the growing likelihood of a U.S. rate increase in December which has lifted 10-year U.S. Treasury yields by 25 basis points so far this month and boosted the dollar.

Wall Street ended down as lower oil prices weighed on energy shares. Stock futures SPc1 were flat in Asian trade.

Major currencies were confined in broad trading ranges on the back of soggy U.S. data and the absence of fresh triggers.

"Rangebound trading continues, with the 104 level heavy for the dollar-yen," said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo. "It's just short-term guys, playing in the market."

The dollar index, which tracks the greenback against six major rivals, slipped 0.1 percent to 97.7, after rising as high as 98.169 in the previous session, its highest level since March 10.

Still, some risk indicators in the market were flickering green such as the Australian dollar, which was up around 0.6 percent at $0.7669, while oil prices rose on hopes the market may not be as oversupplied as some analysts believe.

International benchmark Brent crude LCOc1 was up 0.4 percent while U.S. West Texas Intermediate (WTI) CLc1 edged 0.5 percent higher. 

Safe-haven gold was firm around the $1250 per ounce level as growing risk aversion encouraged buyers, halting a 6 percent fall over the last few weeks.