Chinese manufacturing improvement buoys markets

Global markets up on Chinese manufacturing improvement despite eurozone stumble

Associated Press
Asia stocks sink on Japan, China recovery doubts
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Employees work on the floor of the Tokyo Stock Exchange in Tokyo, Thursday morning, Oct. 24, 2013. An improvement in China's manufacturing wasn't enough to boost Asian stock markets Thursday after Wall Street fell on disappointing corporate earnings. (AP Photo/Koji Sasahara)

LONDON (AP) -- Solid Chinese manufacturing figures shored up markets Thursday despite concerns over the country's banking sector that analysts fear may prompt a tightening in monetary policy.

Those banking worries had weighed on world markets Wednesday and dragged down Chinese indexes again on Thursday.

But an HSBC survey showing that China's manufacturing activity was higher than expected in October supported global sentiment. 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.

"Anything that's good for Chinese growth is viewed as positive for the global economy," said Craig Erlam, market analyst at Alpari.

In Europe, the FTSE 100 index of leading British shares closed 0.6 percent higher at 6,713.18 while France's CAC-40 rose 0.4 percent to 4,275.69. Germany's DAX ended 0.7 percent higher at 8,980.63, just short of breaching the 9,000 level for the first time ever.

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.

In the U.S., the Dow Jones industrial average was up 0.5 percent at 15,488.79 while the broader S&P 500 index rose 0.2 percent to 1,750.50. Solid earnings from Ford helped shore up trading in New York.

In the foreign exchange markets, the euro remained well-supported despite concerns over eurozone 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 growing expectations the Federal Reserve won't reduce its monetary stimulus until next year.

On Thursday, the euro was up 0.3 percent at $1.3809, just shy of its earlier two-year high of $1.3825. The dollar was down 0.1 percent at 97.34 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.

Kathleen Brooks, research director at Forex.com, said markets were not overly concerned by policy tightening, certainly when compared with June, when investors were spooked by a rise in Chinese interbank lending rates.

"Monetary policy tightening in China is a much less scary prospect in October compared to June, as we now know that the Fed has put its tapering plans firmly on the back-burner," she said. "In June there was a concern that China and the U.S. would tighten at the same time."

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.

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

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