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Asian Stocks Rise After China Data

stock market 9 24Jul14

Asian stocks rose broadly on Thursday, with China and Hong Kong posting strong gains while the markets elsewhere saw a relatively muted performance due to lingering concerns about the situation in Ukraine and the Middle East. The S&P 500 closed at a record high overnight and manufacturing data out of China spurred optimism about global growth, helping cap losses in Japan and South Korea.

China's Shanghai Composite index jumped 1.28 percent to 2,105.06 after a preliminary survey by Markit Economics and HSBC Bank showed China's manufacturing activity grew at the quickest pace in eighteen months in July, exceeding economists' expectations. The headline purchasing managers' index climbed to 52.0 from 50.7 in June, beating expectations for a score of 51.0 and signaling expansion for the second consecutive month.

Hong Kong's Hang Seng index closed 0.71 percent higher at 24,141.50, buoyed by progress of the Hong Kong-Shanghai Stock Connect project that will make it easier for overseas funds to buy Shanghai stocks.

Japanese shares lost ground as investors waited for cues from corporate earnings due over the next few weeks. The benchmark Nikkei average dropped 0.29 percent to 15,284.42, while the broader Topix index shed 0.3 percent. Among prominent losers, SoftBank Corp, Nippon Telegraph and Telephone Corp, Pacific Metals and Tokyo Electron fell 2-3 percent. Dai-ichi Life Insurance rose 1.1 percent, Fuji Heavy Industries added a percent and Sharp Corp gained 1.2 percent. Sony Corp rallied 2.5 percent as it unveiled plans to invest $345 million to increase production of its image sensor.

Nissan Motor advanced 1.5 percent on a Nikkei report it would report a higher operating profit in the April-June quarter. Fujifilm Holdings rose 2 percent on a report the camera maker would likely post a 20 percent jump in operating profit for the April-June quarter. Nintendo Co. shares tumbled 3.4 percent on a brokerage downgrade. Matsui Securities dropped 1.9 percent on disappointing first-quarter results.

On the economic front, Japan posted a merchandise trade deficit of822.2 billion yen in June, the Ministry of Finance said - remaining in the red for a record 24th straight month. That missed forecasts for a shortfall of 642.9 billion yen. Exports were down 2.0 percent year-over-year, while imports jumped 8.4 percent.

Separately, the pace of growth in Japan's manufacturing sector slowed slightly in July, Markit Economics said in its preliminary report. The purchasing managers' index came in with a score of 50.8, down from 51.5 in June and falling below estimates for a score of 52.0.

Australian shares ended at a fresh six-year high, with banks pacing the gainers. The benchmark S&P/ASX 200 index rose 0.2 percent to 5,588, extending gains for the seventh straight day. Banks notched modest gains, with Westpac, ANZ, NAB and Commonwealth rising between 0.1 percent and 0.6 percent. Insurance Australia Group rallied 2.2 percent after upgrading its full year profit margin expectations.

Macquarie Group shares fell 2.9 percent after the investment bank issued a cautiously optimistic outlook for fiscal 2015, saying it expects results to come broadly in line with that of last year. In the mining sector, BHP Billiton edged up 0.2 percent and Rio Tinto added 1.1 percent, but smaller rival Fortescue Metals Group dropped 1.1 percent.

Newcrest Mining slumped 6.2 percent. After reviewing its mining assets, the gold miner warned of another round of massive asset impairments by up to A$2.5 billion. Uranium miner Paladin Energy jumped 4.1 percent after entering into an agreement with lenders for re-financing of its $US70 million debt facility for its Langer Heinrich project. Telstra Corporation advanced 0.6 percent after its decision to send more than 600 jobs to Asia over the next 12 months.

Seoul shares ended on a flat note, with the benchmark Kospi average slipping 0.08 percent to finish at 2,026.62. LG Display, the panel supplier for Apple Inc., rose 1.4 percent after the latter posted its second straight quarter of double-digit percentage growth in iPhone sales. LG Electronics climbed 4.2 percent after posting its strongest quarterly profit in more than three years. Hyundai Motor rose 1.6 percent despite its second-quarter profit falling 7 percent due to a stronger won.

The won snapped its three-day winning streak after gross domestic product figures came in weaker than expected, increasing bets the central bank will cut interest rates as soon as next month. The economy grew 0.6 percent in the June quarter, its weakest growth in more than a year.

New Zealand shares rose notably, with tech stocks rebounding in the wake of encouraging results from both Apple Inc. and Facebook. The benchmark NZX-50 index rose 0.55 percent to 5,174.71. Xero shares rallied 4.3 percent after the cloud-based accounting software firm said it is mulling a New York listing as early as 2015. Biotech firm Pacific Edge soared 6.1 percent and Telecom Corp gained a percent, while gold miner OceanaGold paced the decliners, falling 5.1 percent to $3.70.

The kiwi dollar dropped to a six-week low after Reserve Bank of New Zealand governor Graeme Wheeler warned that the level of the domestic currency cannot be justified and "there is potential for a significant fall."

The central bank, meanwhile, hiked its official cash rate by 25 basis points, saying it was important to contain inflation expectations. Separately, trade data released today showed that the country saw a merchandise trade surplus of NZ$247 million in June, marking the eighth monthly surplus in a row.

Elsewhere, Indian shares were marginally lower and Indonesia's Jakarta Composite was down 0.1 percent, while the markets in Malaysia, Singapore and Taiwan were up between 0.1 percent and 0.3 percent. A leading indicator for Malaysia that predicts future economic performance in advance dropped 0.4 percent in May from 117.4 in the previous month, official data showed.

U.S. stocks posted modest gains overnight, as investors weighed earnings from companies including Boeing, PepsiCo, Delta, Dow Chemical, Microsoft and Apple while keeping a wary eye on developments in Ukraine and Gaza. The tech-heavy Nasdaq rose 0.4 percent and the S&P 500 gained 0.2 percent to finish at a fresh record closing high, while the Dow slipped 0.2 percent.

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Market Analysis

Major central banks, led by the U.S. Fed, dominated the economics scene this week with some delivering histroic shifts. In the U.S., the Fed was in focus as Chair Jerome Powell announced the latest policy decision and forward guidance. In Asia, all eyes were on the Bank of Japan as markets waited to see if the central bank would exit its ultra loose monetary policy. Find out how the Swiss central bank gave a surprise in Europe and learn what is the path ahead for U.K. interest rates.

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