Asian shares edge higher supported by Fed, China data

PHOTO: Asian shares edge higher supported by Fed, China data

TOKYO - Asian shares inched higher and the dollar steadied on Thursday, supported by a pick-up in China's manufacturing sector and a commitment by the US Federal Reserve to maintain an accommodative monetary stance.

The HSBC Purchasing Managers' Index for China revived to 51.7 in March from 50.4 in February, pointing towards solid but not spectacular first-quarter growth in the world's second-largest economy.

The MSCI's broadest index of Asia-Pacific shares outside Japan, rose 0.1 per cent with the improving Chinese data helping soothe sentiment rattled by wrangling over a bailout plan for Cyprus.

Hong Kong shares advanced 0.5 per cent, wiping out small losses after the data while Shanghai shares entered positive territory to add 0.3 per cent after the PMI.

The Australian dollar hit a high of US$1.0393 (S$1.3).

"The HSBC figures were definitely a help," said Guy Stear, head of research with Societe Generale in Hong Kong.

South Korean shares trimmed earlier gains to inch up 0.1 per cent while Australian shares gave up gains to fall 0.2 per cent.

"External conditions are favourable today, with the Fed sticking to its easy monetary policy and China's PMI data exceeding expectations," said Kang Hyun-gi, an analyst at IM Securities.

The Fed ended a two-day meeting on Wednesday with a pledge to keep its aggressive policy stimulus despite improvements in the US economy, pointing to still-high unemployment, fiscal headwinds out of Washington and risks from abroad.

Fed Chairman Ben Bernanke said the central bank might slow the pace of its bond buying but only after the labour market showed sustained improvement over a number of months.

"There will be reasonable US economic growth this year and the unemployment rate will drift lower.

But neither will be sufficient to induce the Fed to take its foot off the gas.

The open-ended QE programme is set to run into early 2014 at the very least," said Martin McMahon, economist at Commonwealth Bank.

Dollar Resilient

The dollar steadied against a basket of major currencies , and the euro inched up 0.2 per cent to US$1.2950, off a four-month low of US$1.28435 hit on Tuesday. The dollar was around 96 against the yen.

Japan's Nikkei stock average climbed 1.2 per cent.

New Bank of Japan governor and his two deputies will hold their inaugural news conference later in the day.

They are under pressure to deliver strong reflationary steps as part of Prime Minister Shinzo Abe's drive to end deflation and bolster growth.

Such views sent the 10-year Japanese government bond yield down to its lowest since June 2003 of 0.58 per cent .

US stocks rose, and European shares broke a three-day losing streak on Wednesday as investors bet on policymakers finding a fix for a Cyprus bailout.

After rejecting the terms of a European Union bailout, Cyprus is set to resume crisis talks later on Thursday.

"Market participants are probably right to expect a resolution of the immediate crisis that does not destabilize broader European and global financial markets," Barclays Capital said of bailout prospects for Cyprus.

"But the shape of such a compromise is not easy to imagine, and until one emerges, investors had better keep an eye or two on the eastern Mediterranean," it said.

Barclays noted there were still risks the euro zone may opt to keep Cyprus on financial lifeline indefinitely, without taking steps to ensure long-run sustainability, or force the island state out of the euro zone.

US crude futures fell 0.2 per cent to US$93.35 a barrel while Brent was steady around US$108.71.