Business

Asian shares rise on firm China, US factory data

November 22, 2012

A worker monitors molten iron pouring into a furnace at steel manufacturing plant in Hefei, Anhui province August 15, 2012. — Reuters picA worker monitors molten iron pouring into a furnace at steel manufacturing plant in Hefei, Anhui province August 15, 2012. — Reuters picTOKYO, Nov 22 — Asian shares rose today as a survey showed China’s manufacturing sector expanded for the first time in 13 months in November, adding to optimism after firm US factory data that the global growth slowdown may have turned a corner.

MSCI’s broadest index of Asia-Pacific shares outside Japan extended early gains to rise 0.8 per cent to a one-week high.

Regional equities markets had already been buoyed by recovering risk appetite on easing tension in the Middle East and hopes that a Greece bailout will be agreed next week.

Resources-sensitive Australian shares surged 1.3 per cent to a one-week high as miners climbed. London copper rose 0.5 per cent to US$7,732.75 (RM23,196) a tonne while spot gold inched up 0.2 per cent to US$1,731.34 an ounce.

The China HSBC Flash Manufacturing Purchasing Managers Index rose to a 13-month high of 50.4 in November, indicating factory activity was picking up and pointing to a reviving economic growth after seven consecutive quarters of slowing. A sub-index measuring output rose to 51.3, also the highest since October 2011.

“The data suggests the China’s growth had hit a bottom in the third quarter and prospects are brightening for small and medium-sized firms in China,” said Naohiro Niimura, a partner at research and consulting firm Market Risk Advisory.

While the report is positive, the rise in prices of base metals, for which China is the world’s top consumer, will be contained given the high level of Chinese inventories, he said.

“But shares get a boost because they are driven by sentiment and because contained base metal prices under an improving economy will help companies boost their earnings,” Niimura said.

Japan’s Nikkei stock average jumped 1.2 per cent to a 6-1/2-month high as exporters were lifted by hopes the weakening yen would boost their earnings.

The yen has come under pressure since the Japanese government announced a Dec. 16 election last week.

The opposition Liberal Democratic Party, which is tipped to win, yesterday promised a big extra budget and a policy accord with the central bank on aggressive monetary stimulus to prevent the economy from sliding into recession.

The yen fell to a 7-1/2-month low versus the dollar of 82.59 today, while the yen also hit a 6-1/2-month low of 106.26 yen against the euro.

“Yen, I think, is being driven by anticipation of LDP led government forcing aggressive monetary easing,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York.

Traders said the markets may be capped as activity slows ahead of the US Thanksgiving holiday weekend.

Niimura said as hedge funds close their books this month and next, any swing in prices should be seen as more related to their position adjustments than a change in real risk appetite.

European shares rose for a third straight session yesterday as investors bet on a positive outcome to negotiations over aid to Greece after German Chancellor Angela Merkel said a deal to release emergency aid to Greece was still possible next Monday when euro ministers meet.

The expectations of a Greek deal helped the euro rebound to a two-week high against the dollar of US$1.28685, after being initially sold off after international lenders to Greece failed to reach a deal to release the aid yesterday.

“Efforts to avert a Greek default may provide short-term relief for the euro, but the measures will only help to buy more time as Greece persistently seeks further external assistance,” said David Song, currency analyst at DailyFX, who is maintaining a bearish view on the single currency.

Overnight, US stocks ended modestly higher but volume was one of the year’s lowest on the day ahead of the US Thanksgiving holiday.

US manufacturing grew in November at its quickest pace in five months, with a rise in domestic demand hinting that factories could provide a boost to economic growth in the fourth quarter, while those from Europe are due out later today.

A ceasefire between Israel and Gaza’s Hamas rulers took hold today after eight days of conflict, easing concerns about supply from oil-producing Middle East.

US crude rose 0.3 per cent to US$87.66 a barrel while Brent inched up 0.2 per cent to US$111.06.

A rallying stock market boosted sentiment in Asian credit markets, tightening the spreads on the iTraxx Asia ex-Japan investment-grade index by 3 basis points. — Reuters

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