*

Asian stocks rise amid U.S. inflation data and trade war

pause

*

Fed cautious on rate cuts due to economic uncertainty from

tariffs

*

Dollar remains under pressure as investors reduce U.S.

asset

holdings

(Updates to Asia afternoon)

By Rocky Swift

TOKYO, May 14 (Reuters) - Stocks climbed in Asia on

Wednesday while the dollar wobbled as relatively benign U.S.

inflation data kept alive the prospect of rate cuts by the

Federal Reserve later this year even as investors were still

gauging if the worst of the trade conflicts were over.

As U.S. President Donald Trump's global trade war appeared

to hit pause, led by a truce in the tariff spat between China

and the United States, financial markets remained nervous about

the outlook.

"I'm just a little bit cautious here about chasing the rally

in stocks at this level," said IG analyst Tony Sycamore.

"We've got to wait to see what happens with regards to

headlines and the framework around further tariff negotiations

with other countries, but you know at this point of time the

worst-case scenario has been priced out."

MSCI's broadest index of Asia-Pacific shares outside Japan

was 1.1% higher after U.S. stocks climbed back

into positive territory for the year, erasing losses triggered

by Trump's chaotic rollout of sweeping tariffs.

Hong Kong's Hang Seng index jumped 1.4%, lifted by

tech stocks after Chinese e-commerce retailer JD.com ( JD )

posted strong results. Investor focus this week will be on

earnings from Tencent ( TCTZF ) and Alibaba ( BABA ).

Equity futures pointed to retreats in European markets

and a flat day on Wall Street.

Data overnight showing softer-than-expected U.S. consumer

inflation also provided some relief to investors worried about

the inflationary impact of U.S. tariff policies, which had

severely undercut expectations of near term Fed rate cuts.

Though traders expect inflation to pick up as tariffs lift

import costs, the uncertainty over the outlook remains as

Washington moves ahead to strike deals with its trading

partners.

Global sentiment turned up after a trade deal with the U.S.

and Britain last week, and improved further when U.S. and China

said on Monday they would pause their trade war for 90 days,

bringing down reciprocal duties and removing other measures

while they negotiate a more permanent arrangement.

Trump in an interview on Tuesday said he could see himself

dealing directly with Chinese President Xi Jinping on details of

a trade pact. His touted "potential deals" with India, Japan and

South Korea are still pending.

"We have lingering headwinds and uncertainty when it comes

to trade negotiations with other economies and we still have a

90 day deadline hanging over U.S.-China trade relations," said

Frederic Neumann, chief Asia economist at HSBC.

"Investors are not jumping with two feet in into taking on

risk again because of these lingering uncertainties," he added.

The Fed has warned of rising economic uncertainty,

signalling it's prepared to wait for some time to assess the

impact of U.S. tariffs before moving to cut interest rates

again.

The U.S. dollar, which has taken a beating recently on the

back of the economic and policy uncertainty, dropped 0.4%

against the yen to 146.88, and was little changed at

$1.1189 against the euro. The dollar index was little

changed after a 0.8% slide in the previous session.

Global asset managers held their biggest underweight

position in the dollar in 19 years in May, Bank of America's

global fund manager survey showed on Tuesday.

Japan's Nikkei gauge slid 0.4%, trimming a 1.4% advance on

Tuesday.

With the U.S. inflation figures behind markets, the next

major signal for U.S. economic health is retail sales data for

April due on Thursday. The same day, talks are planned between

Ukraine and Russia in Istanbul with hopes of a ceasefire three

years into the deadliest conflict in Europe since World War Two.

Global asset managers held their biggest underweight

position in the dollar in 19 years in May, as Trump's trade

policy cut investor appetite for U.S. assets, Bank of America's

global fund manager survey (FMS) showed on Tuesday.

The yield on benchmark 10-year Treasury notes

slid 2 basis points to 4.4768%.

U.S. crude dipped 0.5% to $63.35 a barrel, holding

near a two-week high. Spot gold was slightly lower at

$3222.08 per ounce.

(Editing by Shri Navaratnam; Editing by Michael Perry)