SYDNEY, July 24 – Shanghai shares led Asia higher on Tuesday as China touted fiscal action to support the world’s second largest economy, while stellar results from internet giant Alphabet underpinned the tech sector generally.

Global bonds remained under pressure on speculation the Bank of Japan may soon trim its massive stimulus. In China, government bond yields jumped and the offshore yuan hit a one-year low after China’s cabinet said it would pursue a more vigorous fiscal policy and as traders bet on further easing in monetary conditions.

The better mood helped Japan’s Nikkei edge up 0.5 percent, even as a disappointing reading on factory activity suggested the threat of a trade war was starting to bite.

E-Mini futures for the S&P 500 firmed 0.2 percent, and European bourses looked set to start higher

Tech stocks got a boost from the parent of Google which jumped 3.6 percent after hours to hit a record high, valuing the group at a cool $870 billion.

That made up for an otherwise dull Monday on Wall Street where the Dow ended down 0.06 percent, while the S&P 500 gained 0.18 percent and the Nasdaq 0.28 percent.

WHO WILL BUY THESE BONDS?

Bond bulls were still smarting from speculation that the Bank of Japan is close to announcing measures to scale back its massive monetary stimulus, a risk that lifted long-term borrowing costs globally.

Markets were worried that Japanese investors would have less incentive to hunt offshore for yield, said ANZ economist Felicity Emmett.

“The 10 basis-point steepening in the Japanese yield curve is massive in the context of a market that rarely moves more than 1 basis point,” she added.

“It reflects a broader fear that central banks are reducing their purchases while U.S. bond supply is set to rise significantly.”

As a result, 10-year U.S. Treasury yields hit their highest in five weeks around 2.96 percent and were again nearing the psychological 3 percent bulwark.

GDP GUESSING GAMES

Part of the shift in yields was because of chatter that data on second-quarter U.S. economic growth (GDP) due on Friday would easily top current forecasts of 4.1 percent.

Dealers noted some media reports President Donald Trump himself was predicting an outcome of 4.8 percent. That would not be out of bounds given the much-watched Atlanta Fed GDP tracker puts growth at an annualised 4.5 percent.

Such a strong outcome would only add to the risk of faster rate hikes from the Federal Reserve and underpin the dollar.

Against a basket of currencies, the dollar was hovering at 94.697 compared to a low of 94.207 on Monday. It bought 111.30 yen, against Monday’s trough of 110.75.

The euro lapsed to $1.1680, having run into profit-taking at a peak of $1.1750 overnight.

In commodity markets, oil prices eased as the focus turned to oversupply worries and away from escalating tensions between the U.S. and Iran.

U.S. crude lost 16 cents to $67.73, while Brent dipped 14 cents to $72.92 a barrel.

Spot gold was 0.3 percent lower at $1,220.22.