Asian shares retreat, China official PMI improves

Last Updated: Thu, Nov 01, 2012 02:00 hrs

By Chikako Mogi

TOKYO (Reuters) - Asian shares fell on Thursday as China's official manufacturing PMI, while confirming a trend toward recovering growth, lacked the punch to convince investors that the slowdown was bottoming out.

China's October official PMI rose to 50.2 in October from 49.8 in September, almost matching a 50.3 reading forecast, pointing to expanded factory activity in the world's second-largest economy.

The MSCI index of Asia-Pacific shares outside Japan fell 0.7 percent after ending October with a 0.5 percent gain, in contrast to September's 5.6 percent rise.

Australian shares dropped 0.9 percent as miners and banks retreated, while South Korean shares slipped 1.2 pecent, weighed by data showing the country's manufacturing sector in October shrank for a fifth consecutive month, although the pace of decline slowed.

The drop in the Australian dollar was limited with the currency, which is sensitive to data from China, its largest export destination, easing 0.1 percent to $1.0360.

"The return of PMI above 50 suggests economic momentum has indeed picked up. It indicates the effect of policy easing may have been stronger than the consensus expected," Zhiwei Zhang of Nomura wrote in a comment emailed to Reuters.

The final reading of HSBC's China manufacturing PMI for smaller firms is also due during Thursday's session, along with inflation reports from Indonesia and Thailand and India's PMI.

"Last month, both (Chinese PMI) reports showed a rebound from the previous result and could be the start of a new trend if it continues to improve," Neal Gilbert, currency strategist at GFT Forex in New Jersey, said in a note.

Japan's Nikkei average fell 0.4 percent.

European stocks dipped after a mixed batch of corporate earnings, and U.S. stocks were nearly flat in the wake of storm system Sandy, that caused the market's first weather-related two-day closure since the late 19th century.

"New York shares were softer towards the closing, which doesn't leave a good impression. The market may take a wait-and-see stance as the U.S. job data is just around the corner," said Yutaka Miura, senior technical analyst at Mizuho Securities.

The dollar firmed 0.2 percent against the yen to 79.90.

Uncertainty over bailouts for Greece and Spain, the pending "fiscal cliff" of tax increases and U.S. government spending cuts, and the tight U.S. presidential election on November 6 have kept markets directionless.

Investors instead focused on third-quarter corporate earnings and outlook amid a lacklustre global economy.

A gauge of Australian manufacturing activity released on Thursday showed the sector contracted in October for an eight month, with the exports sub-index sliding to the lowest level in over a year.

Later on Thursday, investors will also be examining the U.S. ISM index of national manufacturing conditions, seen holding above 50 for a second straight month in October.

After that, the next key event is the October U.S. payrolls number due on Friday, which is expected to have expanded by 125,000, with the unemployment rate ticking up to 7.9 percent from September's 7.8 percent.

The euro was pinned in the recent $1.28-$1.32 range, trading steady at $1.2955.

Euro zone finance ministers held a teleconference on Wednesday without any breakthrough on Greece, which said on Wednesday that it will overshoot its deficit and debt targets again next year because of a deeper-than-forecast recession.

Eurogroup chairman Jean-Claude Juncker said he expected a deal at the finance ministers' face-to-face meeting on November 12 provided Greece had completed a list of prior actions.

Brent and U.S. benchmark crude posted losses for October for the second consecutive monthly declines, undermined by slowing global growth and expectations of more North Sea supply.

U.S. crude inched down 0.4 percent at $85.94 a barrel

and Brent fell 0.4 percent to $108.29.

(Additional reporting by Lucy Hornby in Beijing and Hideyuki Sano in Tokyo; Editing by Eric Meijer)

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