Asian shares log solid gains, shrug off China PMI

Asian shares were solidly higher on Tuesday, shrugging off a Chinese factory survey that did little to ease concerns about cooling growth and taking some comfort from a private survey showing a glimmer of stabilisation.

MSCI’s broadest index of Asia-Pacific shares outside Japan extended early gains and was up 1.6 per cent, while Japan’s Nikkei was 0.9 per cent higher.

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 Asian trade.

China’s manufacturing PMI

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 stocks

China’s major stock indexes were both lower, with the CSI300 index shedding 0.4 per cent and the Shanghai Composite Index down 0.5 per cent.

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 Chiná’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.

ECB policy meet

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 $1.0585, nursing losses just above a 7 1/2-month low of $1.0557 marked on Monday.

“The market is in a chicken race to sell the euro. Everyone is selling the euro while looking for a timing to buy it back,’’ said Masatoshi Omata, senior manager of market trading at Resona Bank.

Dollar vs yen

Against the yen, the dollar edged down about 0.2 per cent to 122.92.

The dollar index, which tracks the greenback against a basket of six major rival currencies, edged down to 100.09, but remained within sight of its more than 12-year high of 100.39 hit in March.

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

US jobs report

Investors looked past the PMI, and ahead to the key non-farm 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) held rates steady at 2 per cent at its policy meeting. Following the decision, the Australian dollar added about 0.5 per cent to $0.7258.

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.

Crude oil

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 0.7 per cent to $41.95 a barrel.

Brent crude futures were up 0.4 per cent to $44.78.

Spot gold was up about 0.6 per cent at $1,070.90 an ounce, getting a reprieve as the recently robust dollar weakened and moving away from a nearly six-year low of $1,052.46 plumbed last week.