Asian Market Snapshot: Markets Mostly Up as Investor Concern over Global Recovery Eases

Asian stocks gained as investors displayed renewed confidence in the global recovery.  In statements on Monday, Federal Reserve Chairman Ben Bernanke stated that consumer spending could begin to recover with increased wages. In addition, U.S. manufacturing data pointed to expansion in the sector. The Institute for Supply Management (ISM) manufacturing index registered a PMI reading of 55.5 for the month of July. Although expansion occurred in July, it decreased from June when the PMI level was 56.2. (See RGE Critical Issue: U.S. Manufacturing Activity Showing Signs of Levelling Off)

The MSCI Asia Apex 50 closed at 766.27 after rising 1.38 points or 0.18% on the day. The MSCI Asia Pacific Index also posted gains as it rose 1.33% to close at 120.69.

The Japanese NIKKEI jumped 1.29% to 9694.01. Although stocks rose in Japan, there is concern that yen strengthening could stifle growth. Mitsubishi UFJ warned that if the yen surpasses recent highs, downward pressure on Japanese stocks will have to increase. If the yen stays stronger than USD/JPY92-93, export companies will begin to struggle. (See RGE Critical Issue: What Are the Prospects for Japan’s Stock Market in 2010?)

In Hong Kong, the Hang Seng Index gained 0.21% to close at 21457.66.

China’s Shanghai Composite Index was down for the day falling 45.51 points or 1.70% to 2627.00.  China’s PMI numbers have been interpreted by investors as a sign that the economy will slow in H2 2010.  The PMI has been decreasing since March of this year, and the trend continued into July. The HSBC China Manufacturing PMI slid to 49.4 in July from 50.4 in June.  PMI readings below 50 indicate contraction in the manufacturing sector. (See RGE Critical Issue: How Much of a Slowdown Are Chinese PMIs Signaling?)

India’s BSE SENSEX 30 climbed 0.19% to close at 18114.83. On Monday, the HSBC Markit reported that India’s PMI rose to 57.6 in July 2010, from 57.3 in June, as strong domestic demand boosted new orders and production and accelerated price pressures. The continued upward pressure on prices implies that the Reserve Bank of India “will need to apply the brakes more forcefully,” according to Frederic Neumann, co-head of HSBC’s Asian Economics Research.  (See RGE Critical Issue: Will Strong Domestic Demand Sustain India’s Industrial Activity?)

South Korea’s KRX 100 advanced 0.52% on the day to close at 3774.80.

In Australia, the S&P/ASX 200 ended the day at 4571.60, up 30.00 points or 0.66% on the day. The Australian central bank has kept interest rates constant as approvals for the construction of houses and apartments slid 3.3% in June. In addition to falling construction permits, retail sales numbers showed decreases in spending on food, clothing, and shoes. Falling demand has prevented the central bank from pursuing policies to cool the nation’s economy.

While the Aussie dollar and rupee lost 0.03% against the dollar, the yen, kiwi and renminbi strengthened against the dollar.

The yields for 10-year sovereign bonds decreased throughout the region. Unlike its counterparts, yields actually increased in China and New Zealand, rising 0.3 bps and 0.4 bps respectively.

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