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Asia: Markets climb on US rate hopes

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[HONG KONG] Asian markets climbed on Tuesday as mixed readings on the US economy and comments from a top Federal Reserve official raised expectations that US interest rate rises would be gradual.

The gains came despite a negative lead from New York and Europe where traders are awaiting key events this week, including Chinese growth data, the last presidential debate and a European Central Bank policy meeting.

A below-par reading on Monday on manufacturing in New York offset news that overall factory production grew for the third time in four months.

While investors globally expect US interest rates will rise by the end of the year, the figures tempered expectations about the pace of rises after December.

Market voices on:

Fed Vice-Chairman Stanley Fischer said interest rates would likely be suppressed by several factors, including weak economic growth at home and abroad and low corporate investment.

The news added to downward pressure on the dollar, which fell against the yen, euro and even the pound in New York. And while it edged back against the yen in Asia on Tuesday, it continued to struggle against the euro and pound.

"On a longer-term basis, we do think that the Federal Reserve is likely to be behind the curve where hiking rates is concerned," Kelvin Tay, regional chief investment officer at UBS Group's wealth management business in Singapore, told Bloomberg Television.

He added that this meant the dollar was likely at its peak.

Regional stock markets rallied on the prospect of rates staying low for longer. Tokyo ended 0.4 per cent higher as the dollar pared early losses against the yen.

Hong Kong ended 1.6 per cent higher and Shanghai closed up 1.4 per cent.

Sydney gained 0.4 per cent and Seoul put on 0.6 per cent, while Singapore was up 0.1 per cent. Manila surged 2.9 per cent, while there were also healthy gains in Taipei and Jakarta.

In early European trade London added 0.6 per cent, Frankfurt gained 0.5 per cent and Paris rose 0.7 per cent.

"We're likely to see some choppy trading until we get some of these risk events out of the way, such as the last US presidential debate," James Woods, an analyst at Rivkin Securities in Sydney, told Bloomberg News. "Momentum seems to be building up for a December rate hike by the Fed."

Attention turns to the release Wednesday of Chinese third-quarter economic growth figures, with an AFP survey predicting a slowdown from the previous three months.

The figures will be closely watched after last week's disappointing China trade results were tempered by a better-than-expected inflation reading.

The growth figures will be followed later in the day by the third US debate in a bitter presidential election campaign, while the ECB holds a policy meeting Thursday.

ECB chief Mario Draghi will be under pressure to clarify the bank's plans after investors were spooked by talk of an end to its stimulus programme.