Asian shares inched back from one-year peaks on Monday as a rally in Chinese stocks helped offset news of Japan's economic growth slowing to a halt last quarter.
China's blue-chip CSI300 Index .CSI300 rose 1.3 percent to a seven-month high and Shanghai.SSEC added 0.9 percent amid talk more stimulus would be forthcoming from Beijing.
The need for further policy action in Japan was underlined by the subdued economic reading, leaving the Nikkei .N225 dithering either side of flat.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS recouped early losses to stand steady. It has climbed almost 14 percent since late June when Britain's vote to leave the European Union unleashed a new wave of global policy stimulus, led by aggressive action from the Bank of England.
All this easing has pushed rich-world bond yields dramatically lower and driven investors to seek higher returns in longer-term debt and in emerging markets.
Yields on British 10-year gilts GB10YT=RR have more than halved to all-time lows of 53 basis points, having been up at 1.39 percent just before the Brexit vote.
That has pulled down rates right across Europe, with Spanish yields ES10YT=RR, for instance, falling over 60 basis points to break under 1 percent for the first time ever.
The plunge in returns on bonds has made equities look more attractive in comparison. The Dow.DJI, S&P 500 .SPX and Nasdaq .IXIC all made record closing highs last week for the first time since 1999.
The pan-European STOXX 600 index dipped a touch on Friday but that was from a seven-week high.
"After a period of strong gains, shares are due to take a breather," said Shane Oliver, head of investment strategy at AMP Capital.
"But after the consolidation, we expect shares to trend higher over the next 12 months helped by okay valuations, very easy global monetary conditions and continuing moderate global economic growth."
The same fundamentals should also underpin bonds.
"That said, the recent bond rally has taken yields to pathetic levels, leaving them at risk of a snapback," added Oliver.
PARSING THE FED
High on the U.S. calendar this week are inflation figures for July ECONUS and minutes of the last Federal Reserve meeting which might offer more clues on the chance of a rate hike by year end. There are also five separate Fed speakers on the docket this week.
U.S. retail sales growth was unexpectedly flat in July as consumers cut back on buying clothes and other goods, while the producer price index fell 0.4 percent in July, the biggest drop in nearly a year.