Asian stocks move higher, lack bullish conviction amid geopolitical risk and ahead of Chinese GDP

• Asian shares rise on Tuesday and recover a part of the recent heavy losses.
• Geopolitical risks should cap any optimism ahead of the key Chinese data.
• Investors this week will further take cues from Fed Chair Powell’s speech.

Asian shares track the overnight strength in the US equity markets and rise higher on Tuesday, recovering a part of the recent losses led by the recent developments in the Middle East. The broader risk sentiment, meanwhile, remains fragile in the wake of the risk of broadening the Israel-Hamas conflict into a wider proxy war with Iran and ahead of this week's important Chinese macro data.

Israeli forces continued their bombardment of Gaza after efforts to arrange a cease-fire stalled. Furthermore, the Israel Defence Forces chief said the army will soon enter the Gaza Strip to decimate the Hamas terror group. Iran, meanwhile, repeated its warning that a ground invasion of the long-blockaded Gaza would be met with a response from other fronts. Israel also faces the possibility of a separate conflict on its northern border with Lebanon after artillery exchanges with the Iran-backed Hezbollah group. This could keep a lid on any optimism in the markets.

Traders might also prefer to wait on the sidelines and look to Wednesday's release of the third-quarter GDP data from China – Asia’s largest economy – before placing fresh bets. The data is expected to show continued weakness in economic growth and further fuel concerns about the worsening conditions in China. Hence, any disappointing Chinese data might take its toll on the global risk sentiment and weigh heavily on Asian stocks. Investors this week will further take cues from Federal Reserve (Fed) Chair Jerome Powell's scheduled speech on Thursday.

In the meantime, elevated US Treasury bond yields might continue to fuel worries about economic headwinds stemming from rising borrowing costs and contribute to capping gains in the equity markets ahead of the quarterly earnings. Market participants now look to the US economic docket, featuring the release of monthly Retail Sales data and Industrial Production figures later during the early North American session. This, along with geopolitics and the US bond yields, will influence the market sentiment and allow traders to grab short-term opportunities.