SYDNEY - Asian shares were weathering a soft reading on Chinese manufacturing on Thursday as it only whetted expectations for more policy stimulus there, while a sharp rise in British and German bond yields rippled through global debt markets.
The preliminary HSBC China manufacturing PMI for April dipped to a one-year trough of 49.2 in April, when the consensus had been for it to hold steady at 49.6.
Neither was the news bright from Japan where the Markit/JMMA flash PMI fell to 49.7 in April from a final 50.3 in March.
Yet markets took it with equanimity as it added to speculation that further easing would be required from central banks in the two countries.
Japan's Nikkei .N225 was up 0.4 per cent having touched another 15-year high, with foreign investors seen buying financials and other large cap shares.
Stocks in South Korea .KS11 gained 0.5 per cent to near a four-year top, while MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS added 0.4 per cent and was just shy of its highest since early 2008.
Chinese stocks .SSEC inched up 0.3 per cent to a fresh seven-year peak, with investors still emboldened by a commentary in state media saying the bull market "has just begun".
Wall Street had ended firmer on Wednesday as Visa's potential expansion into China and upbeat US housing data helped investors look beyond a mixed bag of quarterly earnings.
The Dow .DJI rose 0.49 per cent, while the S&P 500 .SPX gained 0.51 per cent and the Nasdaq .IXIC 0.42 per cent.
Government bonds went the other way as UK gilts took a hammering when minutes of the Bank of England's last policy meeting were taken as less than dovish by a crowded market.
Yields on British 10-year paper GB10YT=RR jumped almost 15 basis points in the largest one-day rise since August 2013, as investors brought forward the day when the BoE might lift interest rates.
The selling spread to Treasuries where yields on 10-year notes US10YT=RR were up at 1.97 per cent.
German 10-year yields DE10YT=RR shot to 0.163 per cent, doubling in three sessions and hit in part by talk Greece's creditors might be ready to make concessions.
German Chancellor Angela Merkel meets Greek Prime Minister Alexis Tsipras on the sidelines of an EU summit later on Thursday but a breakthrough seems unlikely.
Sterling was a major beneficiary of the spike in UK yields, hitting its highest in over a month early on Thursday.
The pound climbed as far as $1.5080 GBP=D4, while the euro slid to 71.20 pence EURGBP=R, reaching levels not seen since mid-March. Sterling has since eased back to $1.5020, while the common currency remained pinned near the session low.
In contrast, the New Zealand dollar took a hit after a top central banker said rate cuts could be considered if domestic demand and inflationary pressures were to weaken.
The currency shed half a US cent to $0.7586 NZD=D4 as Reserve Bank of New Zealand Assistant Governor John McDermott emphasised that policy needed to stay stimulative to get inflation higher.
The euro also lost ground to stand at $1.0700 EUR=, but remains stuck in a $1.0520-$1.0849 range of the past few weeks.
Against the yen, the dollar was firm around 120.00 JPY= and on track for its fourth straight session of gains.
In commodity markets, spot gold XAU= was down at $1,186.40 an ounce having suffered its sharpest single-session loss since March 6 on Wednesday.
Oil prices were firmer with Brent LCOc1 quoted up 32 cents at $63.05 a barrel, while US crude CLc1 added 37 cents to $56.53.