May 20 (Reuters) - A look at the day ahead in Asian

markets.

Broadly speaking, the global backdrop for Asian markets is still

bright, with investors confident that the Fed will soon cut U.S.

interest rates keeping the dollar, bond yields and volatility in

check, and boosting risk assets.

But there's a cloud that shows no sign of lifting: China. If

anything, it's getting darker.

The economic "data dump" from Beijing on Friday showed that

China's recovery is sputtering - investment growth slowed,

retail sales expanded at the slowest pace since late 2022, and

new home prices fell at the fastest rate in nine years.

Most alarming, the property sector bust is deepening. Granted,

Chinese and Hong Kong shares jumped on Friday after Beijing

unveiled a series of historic steps to stabilize the sector, but

will the bounce last?

Even though the central bank said it is facilitating 1 trillion

yuan in extra funding and easing mortgage rules, and local

governments will buy some apartments, deep-rooted fundamentals

of huge over-supply and weak demand remain.

Renewed concern over China's growth raises the question of how

Beijing will finance its fiscal support measures in the long

term. China is sitting on more than $3 trillion of FX reserves.

Is now the time for China to dip into that rainy day fund to

prevent the property sector bust from bringing down the wider

economy?

It's unlikely, and Beijing may well default to ramping up

exports as the preferred path to recovery. But that would not be

welcomed by the United States, which last week imposed extra

tariffs on $18 billion of imports from China.

These tariffs and the hardening battle lines between the West

and China on trade are bound to feature prominently in next

week's meeting of G7 finance officials in Italy. U.S. Treasury

Secretary Janet Yellen will attend, but it is unclear if Fed

Chair Jerome Powell will travel, after he tested positive for

COVID-19.

That said, financial markets are enjoying a period of remarkable

calm right now. Global FX volatility is the lowest in five

weeks, U.S. Treasury market volatility is at a six-week low, and

the VIX index on Friday fell below 12 for the first time this

year.

This low volatility environment is helping to lift U.S.,

European and other stock markets to all-time highs.

The Asian economic calendar on Monday offers a decent serving of

indicators for investors to get their teeth into, including: GDP

from Thailand, current account and trade data from Indonesia,

Malaysia and Taiwan, and unemployment from Hong Kong.

China's central bank is widely expected to keep its one- and

five-year loan prime rates on hold again at 3.45% and 3.95%,

respectively, after leaving its medium-term lending facility

loans unchanged on Wednesday.

Pressure is mounting for a cut soon, though.

Here are key developments that could provide more direction

to markets on Monday:

- Thailand GDP (Q1)

- Taiwan exports (April)

- Japan tertiary index (March)