Asian shares were solidly higher on Tuesday, as investors latched on to tentative signs of stabilisation in China even as twin factory surveys highlighted the fragile state of the world’s second-largest economy. Financial spreadbetters predicted the buoyant mood to carry over to European trading, with Britain’s FTSE 100 seen opening as much as 0.5 per cent higher, Germany’s DAX 0.4 per cent, and France’s CAC 40 0.5 per cent. “European indices are set to start December on a positive note,” Farbod Mimeh, a junior dealer at Capital Spreads in London, said in a note to clients. “Asian shares climbed higher after the release of mixed Chinese PMI data hinting that government support measures may finally have served their purpose as the economy shows signs of levelling out,” Mimeh said.
MSCI's broadest index of Asia-Pacific shares outside Japan extended early gains and was up 1.8 per cent, while Japan's Nikkei ended up 1.3 per cent, closing above the 20,000 level for the first time since August. Wall Street lost ground overnight, though major US indexes still gained for the second straight month and US stock futures added 0.6 per cent in late 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 erased losses after spending much of the day in negative territory. The CSI300 index was 0.6 per cent higher and the Shanghai Composite Index rose 0.1 per cent. China's yuan was flat 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. The euro inched up to $1.0579, nursing losses just above a 7 1/2-month low of $1.0557 marked on Monday. Against the yen, the dollar edged down about 0.1 per cent to 122.95. The dollar index, which tracks the greenback against a basket of six major rival currencies, edged down to 100.07, but remained within sight of its more than 12-year high of 100.39 hit in March. The dollar had gained overnight despite disappointing U.S. 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 U.S. 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) held rates steady at 2 per cent at its policy meeting. Following the decision, the Australian dollar was up about 0.4 per cent at $0.7257. Australian shares rallied 1.9 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 clawed back some lost ground after volatile trading overnight in which they first rallied and then erased gains after a survey estimated higher OPEC output. US crude added 0.9 per cent to $42.01 a barrel. Brent crude futures were up 0.5 per cent to $44.84. Spot gold was up about 0.8 per cent at $1,071.86 an ounce, getting a reprieve as the recently robust dollar weakened and helped it move away from a nearly six-year low of $1,052.46 plumbed last week.
Reuters
