SYDNEY, March 14 — Asian shares advanced and oil slipped today on hopes for progress in Russian-Ukraine peace talks even as fighting raged on, while bond markets braced for rate rises in the United States and UK this week.

While Russian missiles hit a large Ukrainian base near the border with Poland yesterday, both sides gave their most upbeat assessment yet of prospects for talks.

Just the chance of peace saw S&P 500 stock futures add 0.7 per cent, while Nasdaq futures rose 0.6 per cent.

Japan’s Nikkei rose 1.1 per cent, while MSCI’s broadest index of Asia-Pacific shares outside Japan inched up 0.1 per cent after sliding almost 4 per cent last week.

Bonds remained under pressure having taken a beating last week as surging commodity prices looked set to boost inflation yet further, with yields on 10-year Treasuries rising three basis points early today to 2.03 per cent.

Notably, a key measure of US inflation expectations climbed to 3 per cent and near record highs.

That merely cemented expectations the Federal Reserve would lift rates by 25 basis points at its policy meeting this week and signal more to come through members’ "dot plot” forecasts.

"The dots will likely be mainly clustered around four or five hikes for 2022, up from three previously, given the stronger pace of inflation since the January FOMC meeting,” said Kevin Cummins, chief US economist at NatWest Markets.

"We suspect we could also get an addendum on how the Fed plans to reduce the size of the balance sheet as early as this week.”

The Bank of England is expected to lift its rates to 0.75 per cent on Thursday, the third rise in a row, and to signal more with the market pricing an aggressive 2 per cent by year end.

Fed fund futures 0#FF: imply no less than six or seven hikes this year to around 1.75 per cent, keeping the US dollar underpinned near the highest since May 2020.

The euro was holding at US$1.0927 (RM8.08), and not far from its recent 22-month trough of US$1.0804, while the dollar hit a fresh five-year peak on the yen at 117.55.

"The yen has been unable to display its typical safe-haven attributes, partly because of the big rise in US yields and the BoJ yield curve control policy that prevents JGBs following the move up in core global yields,” said Rodrigo Catril, a senior FX strategist at NAB.

"Japan is also a big energy imported adding to concerns over a terms of trade shock from higher energy prices.”

Gold lost some of its safe-haven charm today, easing 0.6 per cent to US$1,972 an ounce and away for last week’s peak at US$2,069.

Likewise, the chance of progress on Ukraine saw oil prices surrender a little of their recent gains, even as talks with producer Iran seemed to be stalled.

Brent was last quoted US$1.69 lower at US$110.98, while US crude fell US$2.11 to US$107.22.  —  Reuters