TOKYO - Asian shares and the euro rose on Monday as further signs of a stabilising Chinese economy boosted investor risk appetite, offsetting worries that stagnant US budget talks could threaten to derail the world's largest economy.
A firm manufacturing survey from Asia's fourth-largest economy, South Korea, also brightened mood, while data from Australia showing sluggish retail sales and labour demand and tame inflation raised expectations the Reserve Bank of Australia may cut interest rates at its meeting on Tuesday.
India will report its manufacturing data later in the day.
MSCI's broadest index of Asia-Pacific shares outside Japan climbed 0.4 per cent to a fresh nine-month high, after closing at its highest since Feb. 29 on Friday, and a touch below 2012 highs. Hong Kong shares extended gains, hitting fresh intra-day highs on the year.
The pace of activity in China's vast manufacturing sector quickened for the first time in 13 months in November, with the final reading for the HSBC Purchasing Managers' Survey (PMI) rising to 50.5 in November, further evidence that the economy is reviving after seven quarters of slowing growth.
China's official PMI hit a seven-month high of 50.6 for November, according to a manufacturing survey over the weekend, while an official PMI survey of non-manufacturing sectors ticked up to 55.6 in November, led by construction services.
The euro rose to a six-week high against the dollar at US$1.3048 (S$1.60), after the upbeat data on Chinese manufacturing helped to trigger stop-loss buying of the common currency.
"There is growing confidence that China's economy bottomed in July-September, with signs of firmer external demand," said Hirokazu Yuihama, a senior strategist at Daiwa Securities.
"Sentiment is supported because the gradual recovery in Asian economies comes against the backdrop of low interest rates environment, which won't be changed anytime soon, so the recovery in risk sentiment is likely to extend into next year,"he said.
The favourable Chinese data and hopes of a rate cut saw Australian shares up 0.7 per cent to a five-week high.
South Korean shares rose 0.3 per cent to their highest in more than six weeks, buoyed by weekend data showing exports posted their first back-to-back growth of the year and a private manufacturing survey on Monday showing a the pace of contraction slowed in November.
Japan's Nikkei stock average added 0.7 per cent to a fresh seven-month high, extending gains from Friday.
"My understanding of the current market move is mainly due to the catch up of high-beta exporting companies due to the global economic trend ... This process of catch up will continue until the Nikkei hit 10,000," said Ryota Sakagami, chief strategist at SMBC Nikko Securities, of Nikkei.
Japanese firms raised spending on plant and equipment in the third quarter for a fourth consecutive quarterly rise, in the latest sign the world's third-largest economy may have seen the worst from the effect of slack global demand.