Asian shares edge higher

Reuters: Asian shares edged higher on Monday but prices were capped by uncertainty facing the global economy after a private survey showed Chinese manufacturing activity retreated from two-year highs this month.

China’s HSBC flash Purchasing Managers’ Index (PMI) for February slipped to a four-month low of 50.4 and down from January’s final reading of 52.3, which had been the best performance since January 2011.

But the PMI on Monday showed a fourth consecutive month of expansion, confirming that the world’s second economy is recovering, albeit slowly.

Investors remain wary of fragility in the global economic recovery, having pushed markets broadly higher over the past few months on receding pessimism over the Euro zone’s debt crisis and US budget woes.

Markets are also pondering whether Italy’s weekend elections will produce a stable government, and the implications of that for Euro zone cohesion, while Moody’s credit downgrade on Britain weighed on confidence in the pound.

Investors await testimony on Tuesday from Fed Chairman Ben Bernanke for further clues of when the Fed may slow or stop buying bonds.

Financial markets were rattled last week after minutes of the Fed’s January meeting suggested some Fed officials were mulling scaling back its strong monetary stimulus earlier than expected.

The MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.1%, pulled higher by Australian shares which gained 0.6% on strong financials.

South Korean shares were nearly flat as the nation’s first female president, who has shown willingness to talk down the won, was being inaugurated.

Korean carmakers came under pressure on news that an advocate of aggressive monetary easing was poised to head the Bank of Japan.

The Nikkei newspaper reported the Japanese Government is likely to nominate Asian Development Bank President Haruhiko Kuroda and Kikuo Iwata, both vocal advocates of aggressive monetary expansion, as BOJ Governor and deputy governor.

The Nikkei jumped 2% to a 53-month high on Monday as the Yen fell to fresh lows since May 2010 against the Dollar.

Early on Monday, the yen touched a low of 94.77 against the Dollar, while the Euro rose to a high of 124.83 Yen, still off its 34-month peak of 127.71 set early this month.

The Dollar fell sharply to below 93 Yen last week on media reports that Toshiro Muto, a former financial bureaucrat perceived as less willing to take unconventional steps, was the frontrunner candidate for the top BOJ job.

US crude was down 0.1% to US$ 93.07 a barrel and Brent fell 0.2% to US$ 113.92.