Chinese manufacturing improvement buoys markets

AP News
Posted: Oct 24, 2013 7:12 AM
Chinese manufacturing improvement buoys markets

LONDON (AP) — An unexpectedly strong improvement in a Chinese manufacturing survey shored up markets Thursday despite concerns over the country's banking sector that analysts fear may prompt a tightening in monetary policy.

Those worries had weighed on world markets on Wednesday. But an HSBC survey showing that China's manufacturing activity was higher than expected in October supported global sentiment and prevented further losses in China's indexes.

HSBC's main index rose to a seven-month high of 50.9 points from 50.2 percent in September — anything above 50 indicates expansion. The consensus in markets was for a more modest rise to 50.4.

Lee Hardman, an analyst at Bank of Tokyo-Mitsubishi UFJ, said the survey served to "reassure investors that recent upward growth momentum appears to have extended into early Q4." Last week, official figures showed China's economy grew at a better than expected annual rate of 7.8 percent in the third quarter.

In Europe, the FTSE 100 index of leading British shares was up 0.5 percent at 6,705 while France's CAC-40 was 0.2 percent higher at 4,269. Germany's DAX was the standout, as it has been for much of the year, with a 0.7 percent gain to 8,979 that left it well-positioned for it its first ever foray above 9,000.

The gains in Europe came despite a manufacturing survey pointing to waning growth in the eurozone. The main purchasing managers' index from financial information company Markit slipped in October to 51.5 points from September's 27-month high of 52.2.

Wall Street was poised for a solid opening, with Dow futures and the broader S&P 500 futures up 0.4 percent. The main focus later will be on weekly jobless claims numbers as well as the next batch of corporate earnings from the likes of Colgate-Palmolive, Ford, Herschey and Xerox.

In the foreign exchange markets, the euro remained well-supported despite concerns over the eurozone's growth. On Wednesday, the euro rose above $1.38 for the first time since Nov. 2011, largely because the dollar has lost support following the debt stalemate in Washington and expectations the Federal Reserve won't reduce its monetary stimulus until next year.

The euro was up 0.2 percent at $1.3803, just shy of its near two-year high of $1.3822. The dollar was flat at 97.33 yen.

Earlier in Asia, the China figures supported markets apart from in China itself. China's Shanghai Composite Index fell 0.9 percent to 2,164.32 while Hong Kong's Hang Seng shed 0.7 percent to 22,835.82.

Some analysts said there were renewed fears of tighter credit in China after the central bank refrained from injecting funds into money markets for a third day. In the middle of the year, rates in the bank-to-bank lending market shot higher after unexpected efforts by the central bank to curb frothy credit growth.

Elsewhere, Japan's Nikkei 225 rose 0.4 percent to 14,486.41, Seoul's Kospi added 0.5 percent to 2,064.69 and Taiwan's benchmark gained 0.2 percent to 8,413.72.


Eileen Ng in Kuala Lumpur, Malaysia contributed to this report.