Asia: Stocks advance as US manufacturing rises amid earnings

[KUALA LUMPUR] Asian stocks climbed after US economic data bolstered the case for an interest rate increase this year as investors eye earnings across Japan, China and the US. The Topix index advanced as the yen weakened against the US dollar.

The MSCI Asia Pacific Index rose 0.2 per cent to 140.28 as of 9:02am in Tokyo, boosting valuations closer to their 10-year average. Data showed a US manufacturing gauge climbed to the highest since 2015, boosting bets by traders for a rate hike by December to 71 per cent.

A measure tracking global shares advanced on Monday after companies from Rockwell Collins Inc to TD Ameritrade Holding Corp announced takeovers, raising optimism in equity markets.

"If we look at the health of the US economy, it just makes absolute sense to hike in December," said James Woods, a strategist at Rivkin Securities in Sydney.

While stocks may head higher, "it would not be a significant rally until we get the US presidential election and rates out of the way," he said.

A rally in Asian stocks has fizzled so far this month as investors pulled back from riskier bets before the US presidential election on Nov 8. Traders are also cautious as the probability of a US interest rate hike by the end of the year draws closer, bolstered by improving US economic indicators.

The regional gauge capped its best quarter since 2012 with an 8.4 per cent gain in the three months ended September, with shares trading at 14.6 times estimated earnings, compared with its average of 14.9 over the past decade.

Japan's Topix index added 0.6 per cent as the yen declined for a second day against the US dollar. More than 350 companies on the gauge are scheduled to give quarterly updates this week. Precision-motor maker Nidec Corp jumped 4.1 per cent after it raised its full-year net income target on Monday, beating analyst estimates.

South Korea's Kospi index lost 0.5 per cent even after data showed the nation's economy expanded 0.7 per cent in the third quarter, beating estimates.

SK Hynix Inc, a supplier of memory chips to Apple Inc, gained 1.3 per cent after profit topped estimates.

Australia's S&P/ASX 200 Index rose 0.8 per cent. New Zealand's S&P/NZX 50 Index added 0.4 per cent.

Markets in China and Hong Kong have yet to start trading. Futures on the FTSE China A50 Index declined 0.5 per cent and the Hang Seng Index dropped 0.2 per cent in their most recent trading.

The Shanghai Composite Index closed at the highest level since January on Monday amid optimism that the government will boost infrastructure spending and speed up an overhaul of state-owned companies. The Hang Seng China Enterprises Index of mainland companies traded in Hong Kong gained 1.7 per cent.

Futures on the S&P 500 Index climbed 0.1 per cent. The US equity benchmark advanced 0.5 per cent Monday, as T-Mobile US Inc surged on better-than-estimated results.

The Markit purchasing managers' index climbed this month to the highest since last October, beating economists' estimates. St Louis Fed President James Bullard on Monday said December is "most likely" for a rate increase, even as he said US interest rates are likely to stay very low for several years because of low productivity and investor demand for safe assets.

BLOOMBERG