Saturday 24 March 2018

Upbeat China PMI boosts Asia equities, Aussie; oil up on Iraq

A woman walks under a decoration made of coloured umbrellas at a shopping centre in downtown Kunming, Yunnan province
A woman walks under a decoration made of coloured umbrellas at a shopping centre in downtown Kunming, Yunnan province

Asian stocks and the Australian dollar rose today as upbeat news from China's factory sector and fresh highs on Wall Street fuelled appetites for riskier assets, while crude oil held near nine-month highs as fighting in Iraq intensified.

Financial spreadbetters saw a marginally higher open for Europe markets with geopolitical risks tempering economic optimism. Britain's FTSE .FTSE was seen opening up to 0.1 percent higher, Germany's DAX .GDAXI up 0.15 percent and France's CAC .FCHI 0.1 percent higher.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS climbed 0.5 percent.

Gains by China shares were tepid with a liquidity squeeze resulting from new initial public offerings (IPOs) expected to linger through the month.

Tokyo's Nikkei .N225 was up 0.2 percent after some of its earlier gains were erased.

The MSCI index hit intraday highs after the June HSBC/Markit Flash China PMI showed China's factory sector activity expanded for the first time in six months in June, offering new signs the economy is stabilising thanks to Beijing's measures to shore up growth.

"This month's improvement is consistent with data suggesting that the authorities' mini-stimulus is filtering through to the real economy," said Qu Hongbin, chief economist for China at HSBC, referring to a series of measures announced by the government in recent months to spur activity.

"We expect policymakers to continue their current path of accommodative policy stance until the recovery is sustained," he added.

Risk sentiment was dampened earlier in the year when China reported an underwhelming run of data showing a cooling in investment, retail sales and factory output.

The Aussie dollar AUD=D4, which closely tracks the economic performance of China, Australia's top export market, rallied on the stronger-than-expected Chinese factory survey.

The Aussie advanced 0.6 percent to $0.9440, having reached a session high of $0.9444, within easy reach of this year's peak of $0.9461 scaled in April.

The dollar stood little changed at 101.94 yen JPY= after gaining modestly the previous session as U.S. Treasury yields rose.

The euro was also nearly flat at $1.3610 EUR=.

In commodities, Brent crude LCOc1 rose 0.3 percent to $115.20 per barrel, not far off the nine-month high of $115.71 hit on Thursday. O/R

Sunni militants took three towns in Iraq's western Anbar province on Sunday in a push to evict Iraqi security forces from Sunni Muslim areas, witnesses and security sources said.

"Sunni insurgents appear to control more towns, which is helping to keep the oil markets where they are," said Ric Spooner, chief market analyst at Sydney's CMC Markets. "The oil markets have a pretty significant risk premium built in already. Prices are likely to hold these levels."

Repercussion of higher oil prices were felt in other commodity markets, with copper reaching a three-week high as stronger crude set off a flurry of technical buying.

Three-month copper on the London Metal Exchange CMCU3 climbed 0.7 percent to $6,865 a tonne after hitting $6,876 a tonne, its highest since early June. MET/L

The escalating violence in Iraq and geopolitical tensions also kept safe-haven gold well bid. Spot gold XAU= was little changed at $1,313.10 an ounce, not too far from a two-month high of $1,321.90 hit on Friday. GOL/

The Dow .DJI and S&P 500 .SPX closed at record highs on Friday, helped by the prospect of the Federal Reserve keeping interest rates low for a long period of time.

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