SYDNEY: Most Asian markets crept higher on Monday after a closely-watched measure of Chinese manufacturing hit its highest in six months and showed a promising pick up in export orders, another sign of stabilisation in the world’s second biggest economy.
The news helped shake off a soft lead from Wall Street and nudged MSCI’s broadest index of Asia-Pacific shares outside Japan 0.3 percent higher.
Shares in Shanghai gained 0.6 percent, Taiwan’s main index was up 0.9 percent and South Korea firmed 0.3 percent. Japanese markets were closed for a holiday.
The flash HSBC Purchasing Managers’ Index (PMI) for China climbed to 51.2 in September, from August’s 50.1, with 10 out of 11 sub-indices up in the month. Dealers had looked for a reading of around 50.9.
New export orders jumped to a 10-month peak of 50.8, the first time in six months that exports have grown. Readings on manufacturing across Europe are due later on Monday.
The upbeat report sent the Australian dollar a quarter of a US cent higher to $0.9430. China alone takes around one-third of all Australia’s exports, chiefly commodities such as iron ore.
Earlier, the euro had only the briefest of lifts from Chancellor Angela Merkel’s victory in Germany’s general election.
Having initially gained a quarter of a US cent to $1.3555, it quickly faded to $1.3525. Against the yen, the common currency eased to 134.18, from an early 134.56.
That left the dollar index little changed at 80.398, not far from a seven-month trough of 80.060 plumbed last week.
While Merkel won by a landslide, her conservatives appeared just short of the votes needed to rule on their own.
That left open the possibility of a “grand coalition” with the centre-left Social Democrats (SPD), who came a distant second. In the past, establishing a coalition accord has taken between four and eight weeks.
“The formation of a grand coalition could be a positive outcome for the euro zone,” said Peter Dragicevich, a currency strategist at Commonwealth Bank of Australia.
“The SPD is in favour of further euro zone integration. As such, a grand coalition may be more willing to work with the ECB and euro zone governments to find a sustainable solution to the issues plaguing the euro zone periphery.”
He noted one of the SPD’s 2013 election policy proposals was the creation of a European debt redemption fund funded by euro zone bonds.
SECOND-GUESSING THE FED
The Dow Jones industrial average finished Friday with a loss of 1.2 percent, while the S&P 500 Index eased 0.7 percent.
Some of Friday’s dip was attributed to comments from St. Louis Federal Reserve Bank President James Bullard who said that a start to winding down the stimulus program was possible in October, depending on coming economic data.
That was a surprise to most analysts who had thought there would not be enough fresh economic news by the October 29-30 meeting to swing the Fed from its dovish course.
“We do not expect the economy to look much different in the coming months and, in fact, some of the data on housing could look softer,” said Michelle Girard, chief economist at RBS.
Girard thought it more likely the taper would begin in either December or March next year.
“We think the hurdle for tightening in December is somewhat high, and thus believe that the time frame for tapering has most likely been pushed back all the way to March.”
If it is March, then the Fed could continue buying debt for much of 2014. That in turn would further push back the day when it might finally start raising interest rates.
Some clarity might come later on Monday since no less than three Fed officials are speaking, headlined by New York Fed President William Dudley. He is thought to be close to Chairman Ben Bernanke and to speak for the dovish majority of voting members.
Even the thought the Fed might start tapering in October jolted commodity markets, leaving gold down at $1,320.39 an ounce, from Thursday’s peak of $1,374.54. Copper futures were off 1.1 percent.
Brent crude oil was steady at $109.22 a barrel, while US crude edged up 5 cents to $104.80. – Reuters