* 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
* European shares likely to advance
By Chikako Mogi
SINGAPORE, April 2 (Reuters) – Asian shares kicked of the
second quarter with modest gains 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.
European equity markets were also seen gaining, with
financial spreadbetters predicting major European markets
to open up 0.3 to 0.5 percent. U.S.
stock futures inched up 0.3 percent.
MSCI’s broadest index of Asia Pacific shares outside Japan
was up 0.3 percent, after rising as much as 0.7
percent earlier. It climbed nearly 12 percent in the first
quarter.
Japan’s Nikkei average rose as much as 1.1 percent
to approach the one-year high hit last week, after climbing more
than 19 percent in the first three months of 2012.
“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 sliding back to $1.0387.
“Investors will watch PMI readings from other regional
economies … 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.
The holiday-shortened week may slow trading, with Shanghai
markets closed through Wednesday while European, U.S. and some
Asian markets will be closed on Friday for the long Easter
weekend.
REGIONAL GROWTH DISPARITY
Recovery signs were more evident in the United States and
Japan, where reconstruction demand from last year’s devastating
earthquake is expected to take shape, but risks of slowdown are
rising in China and the euro zone, said Kazuto Uchida, an
executive officer and general manager of the global markets
division at the Bank of Tokyo-Mitsubishi UFJ in Tokyo.
“China’s domestic investment is undergoing cyclical
adjustments while exports to Europe are decelerating, and growth
is expected to remain sluggish through autumn. A political
disorder could raise the odds of a hard landing, but at this
moment, the main scenario is for a cyclical slowdown,” he said.
“A rise in stocks and bond yields is likely to continue
through around May on signs of U.S. economic recovery, but the
euro zone’s deteriorating economy and underlying sovereign
credit risks will return to hurt investor sentiment and weigh on
the euro again,” Uchida said. He added that positions based on
pessimism had largely been cleared in the first quarter, making
markets more vulnerable to renewed risk-aversion.
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.
The euro steadied at $1.3338 from Friday’s
broad rally after budget cuts in Spain boosted hopes the country
could stick to an austerity path and euro zone finance ministers
agreed to beef up the region’s financial firewall to prevent
its debt crisis from spilling wider.
It remained unclear, however, if Europe’s G20 partners would
see the boost as sufficient to fortifying the safety net.
Oil prices extended gains, with U.S. crude futures up
0.2 percent to $103.22 a barrel while Brent rose 0.2
percent to $123.18 a barrel. Oil was underpinned by the growing
threat of a disruption of Iranian exports.
Asian credit markets firmed, with the spread on the iTraxx
Asia ex-Japan investment-grade index tightening by
5 basis points.
