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Asia: Shares firm as focus turns to China PMI surveys

Tuesday, December 1, 2015 - 10:34
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[TOKYO] Asian shares were solidly higher on Tuesday, shrugging off one Chinese factory survey that did little to ease persistent concerns about cooling growth in the economy, while a private survey showed a hint of stabilisation.

MSCI's broadest index of Asia-Pacific shares outside Japan extended early gains and was up 1.1 per cent, while Japan's Nikkei added 0.9 per cent.

Wall Street lost ground overnight, though major US indexes still gained for the second straight month and US stock futures were up 0.5 per cent in Asian trade.

China's official Purchasing Managers' Index (PMI) stood at a three-year low of 49.6 in November, compared with the previous month's reading of 49.8 and below both forecasts for a reading of 49.8 as well as the 50-point mark that separates growth from contraction.

But the private Caixin/Markit China Manufacturing PMI showed factory activity contracted at a slower pace than in October, fuelling hopes the economy may be slowly levelling out in response to a series of government support measures.

"This indicates that pressure on economic growth has eased and fiscal policy has had a strong effect," said He Fan, chief economist at Caixin Insight Group. "Overall, the economy is still on track to become more stable." China's major stock indexes opened down, with the CSI300 index and the Shanghai Composite Index both 0.1 per cent lower in early trading.

China's yuan was flat at its open in onshore trading, after the International Monetary Fund on Monday admitted the yuan into its Special Drawing Rights (SDR) basket alongside the dollar, euro, pound sterling and yen. The widely expected move was a milestone in China's integration into global finances and a nod of approval to the country's reforms.

"What is interesting about the new weightings is that the biggest change is for the euro, which now accounts for 30.9 per cent of the basket instead of 37.4 per cent. While EUR/USD did not have much of a reaction to the news, it is certainly not positive for the currency," Kathy Lien, managing director of FX strategy for BK Asset Management, said in a note to clients.

The euro was already under pressure on expectations that the European Central Bank will announce further easing measures at its policy meeting on Thursday. "Everyone is watching the euro this week and we believe that it will test and break US$1.05. While investors have completely discounted easing by the ECB, there's a great deal of uncertainty surrounding what actions the central bank will take," Ms Lien said.

The euro inched up to US$1.0575, nursing losses just above a 7 1/2-month low of US$1.0557 marked on Monday.

Against the yen, the dollar edged up slightly to 123.14.

The dollar index, which tracks the greenback against a basket of six major rival currencies, edged down to 100.14, but remained within sight of its more than 12-year high of 100.39 hit in March.

The dollar gained despite disappointing US economic data. The Chicago Purchasing Management Index fell in November, indicating a contraction in the Midwest factory sector.

Investors looked past the PMI, and ahead to the key nonfarm payrolls report which will be released on Friday. Economists expect it to show that employers added 200,000 jobs in November, according to a Reuters poll. A solid report would cement expectations that the US.

Federal Reserve is on track to increase interest rates this month for the first time in nearly a decade.

By contrast, the Reserve Bank of Australia (RBA) is expected to hold rates steady at 2 per cent at its policy meeting on Tuesday, with an announcement expected to come at 0330 GMT.

Ahead of the decision, the Australian dollar added about 0.4 per cent to US$0.7259 and Australian shares rallied 2.2 per cent, extending gains after trade data showed that Australia's economy enjoyed a huge lift last quarter from a rebound in resource exports.

US crude oil prices steadied after volatile trading overnight in which they first rallied and then erased gains after a survey estimated higher Opec output. US crude added 0.4 per cent to US$41.81 a barrel.

Brent crude futures edged up 0.1 per cent to US$44.66.

Spot gold was up about 0.3 per cent at US$1,067.81 an ounce, though it remained close to a nearly six-year low of US$1,052.46 plumbed last week, pressured by the recently robust dollar and growing expectations of higher US interest rates.

REUTERS