Asian Stocks Advance on China PMI, Fed as Yen Weakens
Stocks in Asia and Europe jumped as U.S. stock-index futures climbed after China’s manufacturing unexpectedly strengthened and the Federal Reserve maintained its bond-buying program. Oil and copper rose, while the yen fell against all its major peers.
The MSCI All-Country World Index increased 0.3 percent, the most since July 22, to 373.68 as of 8:12 a.m. in London. The Stoxx Europe 600 Index advanced 0.5 percent and Standard & Poor’s 500 Index futures added 0.6 percent. Crude futures gained 0.5 percent as copper climbed 0.8 percent. Silver sank 0.9 percent. The yen lost 0.8 percent versus the dollar and the British pound touched the weakest level in more than four months against the euro.
A Chinese government purchasing managers’ index for manufacturing posted a reading of 50.3 for July, topping the median forecast of 49.8 in a Bloomberg survey and above the 50 level that signals expansion. While data in the U.S. showed gross domestic product grew more than economists estimated in the second quarter, the Fed said yesterday persistently low inflation poses a risk. The European Central Bank and the Bank of England review interest rates today.
“Global investors are encouraged as we have stronger GDP data in the U.S. and at the same time, the Fed sent a dovish signal that the stronger growth won’t lead to a quick reversal of stimulus,” Dariusz Kowalczyk, a senior strategist at Credit Agricole CIB in Hong Kong, said by phone today. “Business expectations in China improved and you have a better outlook for more sustainable growth globally.”
Earnings Reports
The Shanghai Composite Index (SHCOMP) of domestic Chinese shares jumped 1.8 percent following the PMI data and after the government pledged to prevent growth slipping below a “reasonable” level. Japan’s Topix Index jumped 2.8 percent after sinking 1.5 percent yesterday.
The MSCI Asia Pacific Index climbed 1.2 percent, headed for the biggest gain since July 11 as all of its 10 industry groups rallied. The gauge advanced 1.3 percent last month, the first gain since April.
Of the 236 companies in the index that have posted earnings since July 1 and for which estimates are available, 51 percent exceeded forecasts, according to data compiled by Bloomberg. Sony Corp. and billionaire Li Ka-shing’s Cheung Kong Holdings Ltd. are scheduled to report profit today.
Fed Stimulus
Industrial metals rose on the London Metal Exchange as the PMI data suggested Chinese demand for commodities will rise. Copper for three-month delivery advanced for a second day to $6,938.75 a metric ton. Lead jumped 1.2 percent and zinc added 0.3 percent. WTI crude rose to $105.54 a barrel after rallying 8.8 percent in July.
While the official PMI data showed China’s manufacturing industry expanded, a separate gauge from HSBC Holdings Plc and Markit Economics fell to 47.7, an 11-month low.
Fed Chairman Ben S. Bernanke, who has damped speculation of imminent cuts to stimulus, and his colleagues have been debating when employment gains will be sufficient to warrant tapering bond purchases that have swelled the Fed’s balance sheet to a record and fueled global asset gains.
The Fed said yesterday its bond buying will remain divided between $45 billion a month of Treasury securities and $40 billion a month of mortgage-backed securities.
Yen, Pound
A report showed yesterday the U.S. economy grew at an annualized rate of 1.7 percent in the second quarter, faster that the 1.1 percent pace in the prior three months. Payroll data due tomorrow will show employers added 185,000 workers in July, after increasing 195,000 in June, a Bloomberg survey of economists shows. The jobless rate probably fell to 7.5 percent from 7.6 percent.
The Fed’s statement “did throw a bone to the doves,” Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington, wrote in a client note today. “Clearer indications that the Federal Open Market Committee is concerned about rising U.S. mortgage rates and low inflation have injected a bit more uncertainty into the market’s expectation that quantitative-easing tapering will kick off in September.”
The yen weakened to 98.69 per dollar, after strengthening 1.3 percent in July. Japan’s currency lost 0.4 percent against the euro. The Bloomberg Dollar Index, which tracks 10 major currencies weighted by liquidity and trade flows versus the greenback, added 0.4 percent.
The pound fell 0.1 percent to 87.54 pence per euro after touching 87.70 earlier, the weakest level since March 12.
Rupee Falls
India’s rupee dropped 0.9 percent to 60.88 per dollar even amid speculation of central bank intervention to bolster the currency. The Reserve Bank of India probably sold dollars, according to two traders with knowledge of the matter, who asked not to be named as the information isn’t public.
A manufacturing index for the euro zone also due today will come in at 50.1, unchanged from the previous month, according to a separate Bloomberg survey. Readings above 50 signal expansion. A PMI index for India from HSBC Holdings Plc and Markit Economics is also scheduled for today.
Silver for immediate delivery declined to $19.68 an ounce after yesterday completing its firstly monthly advance since January. Rubber futures gained 2.3 percent, rebounding from a two-week low. The contracts climbed 1.7 percent in July, the first gain in six months.
Source: Bloomberg
