Asian shares rise as China data soothes growth worry

Tokyo: Asian shares kicked off the second quarter in positive territory on Monday as risk appetite returned after China manufacturing data dispelled fears of a hard landing in the world?s second biggest economy.

MSCI?s broadest index of Asia Pacific shares outside Japan rose 0.3%, after ending the first three months of 2012 up nearly 12%, its best showing since the third quarter of 2010 and best first quarter in 21 years.

Japan?s Nikkei average opened up 0.8%, after posting a more than 19% gain in its best first quarter in 24 years.

Data on Sunday showed China?s official Purchasing Managers? Index (PMI), which highlights large factories, jumped to an 11-month high of 53.1 in March, beating forecasts. But credit-constrained smaller manufacturers struggled, suggesting that while the world?s second-biggest economy is not crashing, it will require some monetary policy easing for support.

?We continue to expect cautious, though supportive, monetary policy easing,? ANZ Bank said in a research note. ?China?s manufacturing sector continues to expand, consistent with our view that the economy?s momentum is strengthening.?

Market sentiment has been supported over the past several months by massive liquidity injections from global central banks and improving US economic data, but turned cautious in recent sessions due to growing doubts over China?s resilience.

The latest Chinese data calmed those jitters and boosted riskier assets such as the Australian dollar, which is closely linked to economic conditions in China, Australia?s biggest single export market. The Australian dollar soared nearly a full US cent to $1.0441, having peaked at $1.0470.

?This is now three months of trend improvement, and is good news for the AUD and commodity currencies in general,? said Annette Beacher, head of Asia Pacific research at TDSecurities.

Later in the session, US and European manufacturing data will be released, offering clues on global factory activity.

Market activity may be subdued in this holiday-shortened week, with Shanghai markets closed through Wednesday while European, US and some Asian markets will be closed on Friday for the long Easter weekend.

Europe Makes Progress

The euro rallied against the dollar and the yen on Friday after budget cuts in Spain boosted hopes the country could stick to an austerity path.

Euro zone finance ministers also agreed on Friday to combine its two rescue funds to make ?500 billion of new funds available in case of emergency until mid-2013, on top of ?200 billion already committed to bailouts for Greece, Ireland and Portugal.

While it marked a step towards fortifying the safety net to prevent the debt crisis from spilling wider, it remained unclear if Europe?s G20 partners would see the boost as sufficient.

World stock markets posted double-digit gains for the first quarter, as data showed US consumer spending rose by the most in seven months in February and consumer confidence rebounded to its highest in more than a year in March. But a separate report on Friday showed the pace of business activity in the US Midwest slowed more than expected in March.

Oil prices stayed firm, with US crude futures up 0.5% to $103.51 a barrel on Monday. Brent settled up 49 cents at $122.88 a barrel on Friday. Oil ended the first quarter with the biggest quarterly gain since the beginning of 2011 as the growing threat of a disruption of Iranian exports added to supply concerns.

Barclays Capital analysts said that easing of three key worries - fiscal austerity in Spain, oil price spikes and growth slowdown in China - would represent a meaningful positive drive for equities.

Asian credit markets steadied early on Monday, with the spread on the iTraxx Asia ex-Japan investment-grade index barely changed from Friday.

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