China data lifts Asian shares, Aussie dlr; yen retreats

By Dominic Lau

TOKYO (Reuters) - Asian shares climbed to a two-week high on Monday, and the Australian dollar and copper gained, as China said its manufacturing expanded in August at the fastest pace in more than a year.

A delay in potential U.S. military action against Syria, as U.S. President Barack Obama sought Congressional support, also helped boost short-term risk appetite.

China’s bullish purchasing managers’ index added to recent positive data from the U.S. and Europe, raising hopes the global economy was on a firmer footing.

European shares were expected to open firmer, with Britain’s FTSE 100 seen up as much as 0.7 percent and Germany’s DAX up as much as 0.9 percent, according to financial spreadbetters.

MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 1 percent, hitting a two-week high and extending a 2.1 percent rise in the previous two sessions, and Tokyo’s Nikkei gained 1.4 percent in light trade. U.S. markets are closed for the Labor Day holiday.

Hong Kong’s Hang Seng Index climbed 1.8 percent and China’s CSI300 index was up 0.5 percent.

Steven Englander, Citi’s global head of G10 FX strategy, recommended investors short the yen on the back of the Chinese figures, the Syrian news, and a panel supporting an increase in Japan’s sales tax.

China’s official purchasing managers’ index (PMI) rose to the highest level since last April and topped market expectations.

“This will reinforce views of China stabilisation. It is a risk positive, if only because it removes some of the short-term risk that the China slowdown could spiral further downwards,” Citi’s Englander wrote in a note.

A separate manufacturing PMI report from HSBC, released on Monday, showed activity in privately owned factories increased over August for the first time in four months.

But India’s manufacturing PMI, also from HSBC, shrank in August for the first time in more than four years, adding to the country’s deepening economic malaise as the central bank struggles to defend the battered rupee currency.

The Indian rupee edged down 0.3 percent to 65.90 to the dollar after two days of gains, and was not far from a record low of 68.80 per dollar hit last week.

Indonesia’s rupiah, which has also been under pressure lately, was down 0.2 percent after the country logged a wider-than-expected trade deficit.


The yen had risen recently on heightened geopolitical tensions and as investors dumped emerging market currencies to position themselves for the U.S. Federal Reserve to begin reducing stimulus, perhaps from its meeting later this month.

“I think the delay in the potential military strikes against Syria will help the global environment in terms of risk,” said Mitul Kotecha, head of global foreign exchange strategy for Credit Agricole in Hong Kong.

On Monday, the yen slipped 0.5 percent to 98.62 yen to the dollar, pulling well away from last week’s low of 96.81, and eased 0.3 percent to 130.21 to the euro.

The Australian dollar, which is seen as a proxy for Chinese growth because of the two countries’ close trade ties, rose 0.7 percent to $0.8966.

Against a basket of major currencies, the U.S. dollar held steady at a four-week high.

Buoyed by the factory activity data from top-consumer China, copper prices rose 2.2 percent and were on track to end a four-day losing run.

Oil and gold prices fell as investors unwound their positions after the U.S. postponed a military strike against the Syrian government, which is accused of using chemical weapons against civilians.

Brent crude prices dropped 1.1 percent to below $113 a barrel, on track for a third day of declines. They touched a six-month peak of $117.34 last week on concerns that U.S. military intervention could lead to retaliation and disrupt crude supply in the Middle East region, which pumps a third of the world’s oil.

Safe-haven gold dipped 0.3 percent to around $1,391 an ounce after falling as low as $1,379.44, a one-week trough, earlier in the session.

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