Asia extends global gains, China PMI taken in stride

Asian stocks rose on Thursday, drawing strength from overnight gains in global equities markets following their weakest quarter in four years, and a China factory activity survey that came in slightly better than initially expected.

The final Caixin/Markit China Manufacturing Purchasing Managers’ Index (PMI) for September was slightly down from August but was a touch higher than a preliminary reading, data released on Thursday showed.

The Australian dollar, used as a proxy of China-related trades, rose 0.3% to $ 0.7044 following the Caixin/Markit PMI release.

Chinese financial markets are closed 1 to 7 October for national holidays.

The Aussie’s gain was modest, however, as the PMI suggested economic conditions were still deteriorating despite a raft of government stimulus measures.

“This indicates the continued weakness of the manufacturing industry, though the pressure driving the sector’s decline has eased,” said He Fan, Chief Economist at Caixin Insight Group, regarding the PMI.

“Tepid demand is a main factor behind the oversupply of manufacturing and why it has not recovered,” said Fan.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.5%. Australian shares were 1% higher. Japan’s Nikkei took a lacklustre central bank ‘tankan’ survey on business sentiment in stride, climbing 1%.

On Wednesday, global equities ended their worst quarter since the 2011 euro zone crisis on an upbeat note, rallying on hopes Wall Street had bottomed for the time being. The Dow and S&P 500 surged overnight as bargain hunters scooped up beaten-down shares.

In currencies on Thursday, the dollar stood tall after an overnight boost from an upbeat US private-sector employment report.

US private employers added 200,000 jobs in September, according to the ADP National Employment Report, beating forecasts and hinting jobs growth may be sufficient for the Federal Reserve to raise interest rates later this year.

In September, the Fed opted against hiking interest rates, citing concerns about global risks and market tumult stemming from China. But in recent days top policymakers including Chair Janet Yellen have said the Fed could raise rates this year if the economy improves.

The euro dipped 0.1% to at $ 1.1162 after shedding 0.6% overnight. The dollar rose 0.2% to 120.08 yen after nudging up overnight versus its Japanese counterpart.

The dollar index was flat at 96.307 after rising 0.2% on Wednesday, with higher US Treasury yields in the wake of the bullish jobs report shoring up the greenback.

As with stocks, commodities got a breather amid the lull in global risk aversion, with copper and nickel rallying as bearish investors closed out quarter-end positions and ahead of the Chinese holidays.

Industrial metals were boosted by a bounce in the shares of hard-hit commodity group Glencore.

Three-month copper on the London Metal Exchange was up 0.9% at $ 5,205.00 a tonne.

Nickel climbed to a four-week high of $ 10,465.00 a tonne.

US crude was up 1.3% at $ 45.69 a barrel despite data showing a surge in US crude oil and gasoline stocks last week, riding on overnight momentum generated by quarter-end ‘window dressing’ by investors.