TOKYO, April 23 (Reuters) – Asian shares and the euro easedon Monday, but losses were kept in check after a report showedChinese factory activity stabilising in April, alleviatingworries about a sharp deceleration in the world’s second largesteconomy.
European shares were also expecting a lower start, with financial spreadbetters predicting that major European markets would open down as much as 0.6 percent.
The HSBC Flash Purchasing Managers Index showed China’s factory output ticked higher, new business rose from multi month lows and export orders perked up, though not sufficiently for a private sector survey of purchasing managers to flag a return to expansionary territory.
The index, the earliest indicator of China’s industrial activity, improved to 49.1 in April from 48.3 in March, but stayed below 50, indicating contracting economic activity.
MSCI’s broadest index of Asia Pacific shares outside Japan narrowed its loss to a 0.4 percent fall after the data from a 0.5 percent drop, while losses in Hong Kong shares also shrank to a fall of 0.5 percent from a 0.8 percent drop.
China’s PMI lifted the Australian dollar, which is sensitive to data from its biggest export market, to above $1.0340 from $1.0335.
The Aussie was weighed earlier by anunexpected decline in producer prices last quarter, which setthe stage for benign reading of consumer inflation due onTuesday and a cut in interest rates next week.
“The Chinese PMI was in line with market consensus for a soft landing. While growth is slowing, the slowdown has not accelerated sharply, giving some relief to those who had feared for a worse reading,” said Tomomichi Akuta, senior energy researcher at Mitsubishi UFJ Research and Consulting in Tokyo.
“This means the impact to commodities prices will be limited as demand will remain lackluster,” he added.
Copper futures retreated on Monday as investors stayed cautious, down about 1 percent at $8,113 a metric tonne.
Brent futures held steady around $118.80, while US crude futures edged down 0.1 percent to $103.80 a barrel.
The euro eased 0.2 percent at $1.3193, retreating from a two week high of $1.3225 hit on Friday.
Market players will now look to the euro zone’s manufacturing activity report due later in the session.
“We also expect euro area PMI to come marginally above consensus on Monday, helping markets keep the positive tone inherited from Friday,” Barclays Capital analysts said in a research note.
IMF FIREPOWER BOOSTEDMarket sentiment stabilized before the Chinese data, after the International Monetary Fund secured $430 billion to erect a higher firewall in case the euro zone’s debt crisis spreads.
NEW YORK, April 17 (Reuters) – US money market funds’appetite for euro zone bank debt could be crimped further ascontagion worries due to Spain’s public finance woes cause fundmanagers to rethink their decision to shift money back into theregion earlier this year.
But many see the IMF’s expanded resources as merely buying time, keeping intact markets’ scrutiny over progress in either debt restructuring or growth scenario.
“The increase in the IMF is just a safety net. That alone is not enough to boost risk assets,” said Koji Fukaya, chief currency strategist at Credit Suisse in Tokyo.
The socialist candidate Francois Hollande won 28.4 percent of the votes during the first round of voting last week and will now face incumbent conservative President Nicolas Sarkozy who collected 25.5 percent.
Some analysts have warned a Sarkozy defeat in the May 6 second round ballot would weaken the current close cooperation between France and Germany in dealing with the euro zone debt crisis, while others said Hollande, if he wins, was unlikely to threaten Europe’s general course for fiscal austerity.
“Sarkozy’s leadership abilities were instrumental in the euro zone’s fight against debt and investors are obviously worried that an absence of this key figure may be detrimental to further progress,” said Oh On su, an analyst at Hyundai Securities.
FUNDS SEEK GROWTH POTENTIALAs the world’s leading economies struggle to pick up momentum, investors sought opportunities for growth potential elsewhere.
Indonesia, Southeast Asia’s largest economy, saw a 30.3 percent surge in foreign direct investment in the first quarter, boosted by an investment grade credit rating which let it recently issue global bonds with yields lower than some of its emerging peers and troubled euro zone members.
EPFR Global tracked Europe Equity Funds saw outflows for the fourth week running in mid April on growing doubts over the ability of European policy makers to contain the euro zone debt crisis as Spanish sovereign debt yields soared, but Japan Equity Funds enjoyed inflows on the prospect of more stimuli from the Bank of Japan, Fund tracker EPFR Global said.
Asian credit markets were cautious, with the spread on the iTraxx Asia ex Japan investment grade index widening a tad by 1 basis point.
(Additional reporting by Joonhee Yu in Seoul and Hideyuki Sano in Tokyo; Editing by Alex Richardson and Michael Perry).
Julia Macdonald is a business journalist based in Cairns, Australia. Julia has a passion for financial markets and breaking news stories and loves writing about business news, stock market, and economic opinions that matters most to its audience. Julia spends a lot of time discovering and researching latest financial markets and industry news stories in order to make sure the latest and greatest stories are brought to you first on BigBoardNews.com.
