Brighter China Manufacturing PMI Gives Share Buyers In Asia Reasons To Spend

Reuters - Asia stocks rose Tuesday after strong readings on China's manufacturing sector offset the weak lead from a softer Wall Street session.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.2 percent to regain some ground it had lost Monday.

The Hang Seng Index in Hong Kong traded 0.18 percent higher while the Shanghai Composite recovered early losses to be 0.1 percent higher. Japan's Nikkei 225 erased early losses to trade flat.

The Caixin/Markit Manufacturing Purchasing Managers' Index showed China's factory activity expanded at the fastest clip in nearly a decade in August - bolstered by the first increase in new export orders this year.

"What we are seeing here is the slow but choppy export recovery that is taking a bit longer than maybe some market participants thought it would - and that's because markets remain largely out of sync," said Daniel Gerard, senior multiasset strategist at State Street Global Markets, based in Singapore.

"September is also going to be a choppy recovery and, until we get closer to more news about a vaccine, it's going to remain that way."

Taiwan stocks gained 0.5 percent after the U.S. said Monday it was establishing a new bilateral economic dialogue with the country - an initiative it said was designed to support Taipei.

Australia's S&P/ASX 200 was an outlier - declining 2.4 percent to four-week lows on rising diplomatic tensions between it and China.

On Wall Street, the Dow Jones industrial average and the S&P 500 ended in the red overnight while the Nasdaq rose solidly.

The S&P gained more than 7 percent for the month to notch its best August since 1986 in what is traditionally a softer month for stock performance.

Wall Street declines overnight were mostly caused by month-end portfolio rebalancing "rather than a new trend in equities," said Rodrigo Catril, senior foreign-exchange strategist at NAB Market Research in Sydney.

The Nasdaq fared even better than the S&P for the month, up nearly 10 percent as it rallied for a fifth straight month.

In currencies, the dollar dropped against its basket of comparative early Tuesday. The dollar index fell 0.4 percent. The euro was up 0.5 percent to $1.1993.

The yen strengthened 0.3 percent against the U.S. unit at 105.63 per dollar while Sterling was last trading at $1.3410 - up 0.3 percent on the day.

Expectations that the U.S. Federal Reserve will keep interest rates low for an extended period kept the dollar soft - for a fourth consecutive month of declines in August, its longest losing streak since 2017.

Fed Vice Chairman Richard Clarida on Monday expanded on Gov. Jerome Powell's comments from last week, saying that under the U.S. central bank's new policy view, a low rate of unemployment doesn't, on its own, trigger higher interest rates.

Last week, the Fed said its new strategy is to use higher inflation when the economy is robust to offset the effect of periods of weaker prices.

Investors in Asia are waiting for a rate decision from Australia's central bank. While the Reserve Bank of Australia isn't expected to change policy its commentary on the economic outlook will be closely watched.

The Australian dollar was up 0.4 percent at $0.7470.

In commodity markets, oil prices rose, reversing overnight losses, as investors shifted to risk assets.

Brent crude climbed 27 cents, or 0.6 percent, to $45.55 a barrel, after rising 0.5 percent to $45.28 Monday. U.S. crude rose 21 cents, or 0.5 percent, to $42.82 a barrel, having fallen 0.8 percent in the previous session.

Elsewhere, gold gained to $1,980 an ounce, up 0.6 percent on the day.