Asian shares edge higher supported by Fed: China data

Reuters: 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% with the improving Chinese data helping soothe sentiment rattled by wrangling over a bailout plan for Cyprus.

Hong Kong shares advanced 0.5%, wiping out small losses after the data while Shanghai shares entered positive territory to add 0.3% after the PMI. The Australian Dollar hit a high of US$ 1.0393.

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

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

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

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 program is set to run into early 2014 at the very least,” economist at Commonwealth Bank Martin McMahon said.

The Dollar steadied against a basket of major currencies, and the euro inched up 0.2% 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%.

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%.

The 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 destabilise 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.

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