Asian shares bounced off two-month lows and edged to their best day in seven weeks on Wednesday, as data showing China’s manufacturing activity expanded at the fastest pace in more than a decade posted disappointing results. There was a jolt of optimism in the markets.
China’s official manufacturing purchasing managers’ index (PMI) stood at 52.6 last month compared with 50.1 in January and was well ahead of an analyst forecast for 50.5, giving investors hope that China’s recovery could offset a global slowdown.
MSCI’s broadest index of Asia-Pacific shares outside Japan jumped 1.5% in early trading hours, hitting two-month lows ahead of data release.
Hong Kong’s Hang Seng rose 3.2%, led by gains in developers and consumer-tech stocks and the only two stocks to decline. Chinese shares were also boosted, with China’s blue-chip CSI 300 index jumping more than 1%.
Japan’s Nikkei rose 0.2% and S&P 500 futures pared early losses to trade flat. European futures rose 0.1%.
“The usual lack of hard Jan/Feb data until later this month makes the China February PMI data even more important this time around,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.
“The China February official PMI and the Caixin Manufacturing PMI all rebounded strongly, and especially higher than last January’s data.”
In currency markets, the dollar’s February gains are running out of steam and Asian currencies advanced on the strength of Chinese data – even as economic updates from India, Australia and South Korea came in weak.
China’s yuan rose about 0.4% – its most in more than a month – to 6.9063 against the dollar. The Australian dollar reversed losses made after lower-than-expected Australian growth and inflation data and rose 0.3% to $0.6751.
The kiwi dollar, which fell nearly 4% last month, bounced off its 200-day moving average and rose 0.5% to $0.6217. The yen stood at 136.35.
Curbing gains was a concern about longer-term interest rates in advanced economies, which was behind February’s volatility in stock and bond markets.
The next wave of economic indicators is likely to be important as markets speculate whether the price of future rate hikes is high enough now.
Higher-than-expected inflation readings in Europe fueled bond selling overnight, before an unexpected drop in US confidence data offered a glimmer of hope that rate hikes are being cut and perhaps within range.
The two-year Treasury yield, a guide to short-term expectations of US rates, is near a four-month high but at 4.8347%, down from November’s peak of 4.8830%. The benchmark 10-year yield in Asia stood at 3.9396%.
Commodities rose on hopes of Chinese demand and Brent crude futures were last up 0.6% at $83.94 a barrel.
Gains stabilized after rains in parts of the US winter wheat belt and optimism over a Russia-Ukraine export deal prompted investors to liquidate some long positions. [GRA/]
Geopolitics also kept nerves high in the background. US President Joe Biden’s visit to Kiev and Russian President Vladimir Putin’s abandonment of the last remaining nuclear arms control treaty with the US signaled a hardening of the situation.
China, which last week signaled its support for Russia by sending its top diplomat to Moscow, has called for calm, though it has been met with skepticism and Washington has said in recent days that it is concerned that China Can send weapons to Russia.
“Should Beijing send arms to Russia, it risks a rapid geopolitical breakdown of the world economy,” said Jan Lambregts, head of research at Rabobank. “Markets haven’t even begun to consider what this could mean.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
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