Asian markets rise on strong earnings reports

Agence France-Presse

Posted at Aug 02 2010 12:34 PM | Updated as of Aug 02 2010 08:34 PM

HONG KONG - Asian stock markets were higher on Monday, with sentiment boosted by strong Japanese earnings results, while dealers overlooked data showing manufacturing growth in China had slowed.

However Japan's finance minister cautioned against the strength of the yen after it soared against the dollar at the end of last week, leading to concerns for the crucial export market which could hurt economic growth.

Hong Kong was 1.43% higher, Tokyo picked up 1.24% by the break and Sydney gained 0.91%.

An official survey released Sunday by Beijing showed that manufacturing activity slowed in July as government efforts to cool the fast-growing economy continued to take effect.

A monthly survey by the official China Federation of Logistics and Purchasing indicated activity slowed to a reading of 51.2 in July from 52.1 in June.

And an HSBC survey showed Monday that manufacturing contracted for the first time since March 2009, with the purchasing managers index standing at 49.4 in July, compared with 50.4 in June.

For both surveys a reading above 50 means the sector is expanding, while below 50 indicates an overall decline.

The news follows figures last month that showed the economy grew slower in the second quarter as massive stimulus spending was scaled back. However, gross domestic product maintained its double-digit expansion for the third quarter in a row, expanding 10.3% in the three months to June.

Shanghai was 0.39% higher in the morning as traders were boosted by the prospect that Beijing will hold off introducing further policies aimed at cooling the red-hot economy.

Tokyo's Nikkei was lifted by Friday's corporate reports, which showed record profits for car giant Honda and massive earnings for Hitachi.

And Japan's biggest financial groups Mitsubishi UFJ, Mizuho and Nomura announced healthy profits thanks to an economic recovery that cut the lender's bad loans.

But the yen's strength remained a worry on Monday. The greenback fell to around 86.00 yen at the weekend, sparking concerns over exporters' earnings.

However, the dollar picked up to around 87 yen Monday after Finance Minister Yoshihiko Noda said excessive volatility in currency rates could hurt economic activity.

But the greenback soon fell back to 86.66 yen in Tokyo late morning trade, compared with 86.47 yen in New York late Friday.

Noda told reporters: "Excessive fluctuations or disorderly movements are not desirable for the stability of economies and financial markets, and from this perspective, I will properly monitor daily market movements."

Rises in the yen could take steam out of Japan's export-driven recovery, by making the nation's products less competitive on global markets, and by reducing the yen value of international trade gains.

The Dow provided a weak lead Friday, closing flat after government data showed a slowdown in the US economic recovery. The Commerce Department reported growth declined to 2.4% in the second quarter from a upwardly revised 3.7% in the first three months of the year.

However, there was some upbeat news after the University of Michigan's consumer sentiment index for July increased by a larger amount than initially reported in the preliminary release.

Separately the Institute for Supply Management-Chicago said its business barometer rose to 62.3 points this month. Readings higher than 50 signal growth.

New York's main futures contract, light sweet crude for delivery in September, advanced 35 cents to $79.30 a barrel.

Brent North Sea crude for September delivery rose 32 cents to $78.50.

Gold opened at $1,181.30-$1,182.30 an ounce, up from Friday's close of $1,168.00-$1,169.00.