Asia stocks advance as China PMI, US data help cap strong quarter
July 31, 2021

Asia stocks advance as China PMI, US data help cap strong quarter amid virus woes

TOKYO/NEW YORK/HONG KONG (JAPAN/US) – Asian shares advanced on Tuesday as positive economic data from China and the United States helped to close out a strong quarter, though a renewed surge in global coronavirus cases underlined a challenging investment climate.

MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.51%, on course for its highest quarterly gain in nearly 11 years.

However, it was not clear whether the optimism would carry over into European trading, with EUROSTOXX 50 futures losing 0.7%, FTSE futures shedding 0.36%, and E-Mini futures for the S&P 500 down 0.24%.

Asian markets got an early boost after an official survey on China’s vast factory sector showed activity quickened last month, defying expectations for a modest slowdown. That came on top of strong US housing market data overnight, which helped buttress Wall Street stocks despite a worrying surge in coronavirus cases.

The Chinese factory data lifted its blue chips which jumped 0.82% to their highest level since mid March.

Still, most analysts cautioned against getting carried away by the factory data, noting that export orders were still contracting.

“The divergence of the domestic recovery and foreign orders contraction highlights that the Chinese economy remains affected by the global situation for the Covid-19 pandemic,” ING analysts said in a note.

“As new infection cases globally continue to grow, we believe that China will continue to face a contraction in export orders in the coming months.” 

The headline numbers, however, were enough to cheer markets.

Shares in Australia were also up 1.43%, Korea jumped 1% and Japan rose 1.33%, despite a larger-than-expected decline in Japanese industrial production.

Hong Kong stocks tacked on a more modest 0.1%, giving up much of the sizable early gains as investors came to terms with the Chinese parliament’s passage of a security law that will increase Beijing’s control over the former British colony.

The move has sparked international condemnation and caused the US to begin steps to remove the territory’s special status.

On the whole, Asia ex-Japan shares were on course for a 17.8% gain in the second quarter, which would be the biggest quarterly increase since the third quarter of 2009. Stocks appear to have received an added boost as some investors adjusted positions on the last trading day of the quarter.

However, despite the bounce and underscoring the scale of the pandemic-sparked rout earlier this year, the index was still set for a 7% decline since January 1.

“Overnight moves in markets were not large but one does get the distinct impression that markets have got it both ways – with equities rallying on rebounding data and bonds rallying on dismal COVID-19 news,” said ANZ Research analyst Rahul Khare.

(Photos syndicated via Reuters)
This story has been edited by BH staff and is published from a syndicated field

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