* MSCI Asia ex-Japan trims early gains on caution
* Nikkei rises as much as 1.1 pct to near 1-year high
* China PMI surprises, boosts Aussie but rally fizzles
By Chikako Mogi
TOKYO, April 2 (Reuters) – Asian shares kicked off the
second quarter with a modest gain on Monday, as surprisingly
firm China manufacturing data dispelled fears of a hard landing
in the world’s second biggest economy, but caution capped prices
before U.S. and European factory data.
MSCI’s broadest index of Asia Pacific shares outside Japan
rose as much as 0.7 percent but last stood up
0.1 percent. It climbed nearly 12 percent in the January period
for its best showing since the third quarter of 2010 and best
first quarter in 21 years.
Japan’s Nikkei average rose as much as 1.1 percent
to approach the one-year high hit last week, after rising more
than 19 percent in its best first quarter in 24 years.
“The Chinese reading was much better than most were
expecting and that optimism has flown into risky assets now. If
China is still in a big growth stage then Australian commodities
will be in demand,” IG markets strategist Stan Shamu said.
Data on Sunday showed China’s official Purchasing Managers’
Index (PMI), which covers large factories, jumped
to an 11-month high of 53.1 in March, beating forecasts.
While the official PMI soothed doubts about China’s
resilience, a private sector survey of smaller factories by HSBC
raised concerns that small manufacturers were struggling and
contributed to a fizzling of a rally in riskier assets.
The Australian dollar soared more than a full U.S.
cent to a peak of $1.0470 before slipping to $1.0399.
“Investors will watch PMI readings from other regional
economies, including Korea, Taiwan and India. If they also
improve, the story of Asia regaining momentum in Q2 would
provide more lasting support for markets,” said Credit Agricole
CIB in a research note.
South Korea’s manufacturing sector growth accelerated to a
one-year high in March as new export orders continued to expand,
a purchasing managers’ survey showed on Monday.
Later in the session, U.S. 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, U.S. and some Asian markets will be closed on Friday
for the long Easter weekend.
EUROPE MAKES PROGRESS
The euro steadied at $1.3340 from Friday’s
broad rally 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 euros of new funds
available in case of emergency until mid-2013, on top of 200
billion euros 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.
Credit Suisse said it was upgrading its view of Japan to
“tactical overweight”, saying Japan is “typically a late cycle
play” and recommending a focus on Japanese stocks with U.S.
exposure. Credit Suisse added it continued to overweight Italy,
and domestically focused German stocks, but underweight Spain
and domestic France.
Data on Friday showed U.S. 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 showed the pace of business activity in the U.S.
Midwest slowed more than expected in March.
Oil prices extended gains, with U.S. crude futures up
0.2 percent to $103.19 a barrel while Brent rose 0.2
percent to $123.10 a barrel. Oil was underpinned by the growing
threat of a disruption of Iranian exports.
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 firmed, with the spread on the iTraxx
Asia ex-Japan investment-grade index tightening by
5 basis points.
