U.S. manufacturing activity gained momentum last month, according to data released Monday by the Institute for Supply Management. The ISM's manufacturing purchasing managers' index unexpectedly increased to 57.3 in November from 56.4 in October. The reading is the highest since April 2011. A reading above 50 indicates expanding activity. Also, data provider Markit said its own final U.S. PMI rebounded to 54.7 from a year-low of 51.8 in October. As with the ISM, a Markit reading over 50 indicates expansion.
In addition, construction spending increased 0.8% in October to an annual rate of $908.4 billion, the highest level since May 2009, as a rebound in public construction projects offset a drop in private outlays.
Improving US economic data renewed speculation that the Fed to begin scaling back its monthly bond purchases program sooner than anticipated, with many expecting an announcement in March. The central bank has said it would begin to slow the program when certain economic measures meet its targets.
Investors' were cautiously awaiting slew of U.S. economic data this week that might provide clearer signs about when the Federal Reserve will start reducing its monetary stimulus. The calendar is packed this week with data on manufacturing, home sales, a third quarter GDP revision, and culminating with the November nonfarm payrolls report on Friday. The Fed has said improvement in the labor market is a key factor in its policy assessment.
The Federal Open Market Committee (FOMC) holds a two-day policy meeting on interest rates in the United States on 17-18 December 2013. The US central bank currently buys bonds worth $85 billion a month in a bid to hold interest rates low and encourage economic growth in the world's biggest economy. Fed's bond-buying program has been a source of liquidity for most Asian and emerging markets this year. Minutes of the Fed's October meeting released on 20 November 2013 showed officials may reduce their $85 billion a month of bond buying if the economy improves as anticipated.
In the Asian bourses, Australian shares declined for third session in row, weighing the benchmark S&P/ASX 200 index down by 23.40 points to finish at 5256.10 after the Reserve Bank of Australia held its benchmark interest rate at a record low of 2.5%.
Many of the sectoral heavyweights declined in the Australian market, with shares in mining companies, mainly precious metal producers, were leading losses. Meanwhile selloff was also dominated in retailer, consumer goods, financials and tech counters.
Shares of precious metal producers tanked in Sydney after gold futures fell by more than 2% overnight on concerns about a pullback in monetary stimulus by the U.S. Federal Reserve. Junior gold miner Silver Lake Resources was the worst-performing stock, dumping 17.4% to A$0.38. Gold miner Newcrest Mining fell 6.69% to A$7.25, Evolution Mining 14.29% to A$0.51 and Kingsgate Consolidated 12.04% to A$0.95.
Healthcare was the best-performing sector in Sydney, as plasma product and vaccine exporter CSL, a beneficiary of a lower dollar, added 1.1% to A$68.40. Shopping mall operator Westfield Group, another beneficiary of a lower dollar, added 1.8% to A$10.36.
Industrial rail operator Aurizon (formerly QR National) added 1.7% to A$4.75, as the Queensland government cut its stake to below 5% after selling $350 million in shares to pay down the state's debt.
Reserve Bank of Australia Board has decided to leave the cash rate unchanged at 2.5% at its meeting on Tuesday. The RBA's Board judged that the setting of monetary policy remained appropriate. The RBA's Board said they will continue to assess the outlook and adjust policy as needed to foster sustainable growth in demand and inflation outcomes consistent with the target.
The Australia Bureau of Statistics said on Tuesday that Australia's current account deficit widened to a seasonally adjusted A$12.7 billion in the third quarter of 2013 from the second quarter. The second quarter deficit was revised higher to A$12.1 billion from the A$9.4 billion initially reported.
Preliminary estimates for November indicate that the index increased by 0.1% (on a monthly average basis) in SDR terms, after declining by 0.4% in October (revised). The prices of iron ore and thermal coal increased in November, which were partly offset by declines in the prices of gold, coking coal and wheat. The base metals and the rural subindices also declined in the month. In Australian dollar terms, the index increased by 1.5% in November. Over the past year, the index has declined by 1.9% in SDR terms. The prices of gold, wheat and coal have fallen over this period, while the price of iron ore has risen. The index has risen by 9.6% in Australian dollar terms over the past year.
Australian dollar declined from yesterday closure against greenback and other major currencies on Tuesday after RBA's said today that Australian dollar, while below its level earlier in the year, is still uncomfortably high. A lower level of the exchange rate is likely to be needed to achieve balanced growth in the economy, RBA said. The Australian dollar stood at 0.9098 against US dollar around late afternoon Tuesday.
In Japan, shares in the Japanese financial market finished climbed up, bolstering the benchmark Nikkei Stock Average 0.6% stronger to 15749.66, fresh closing high of nearly six years, thanks to yen depreciation against major currencies and upbeat US economic data.
Most of the rise of the Tokyo market came due to the US dollar appreciation to new half-year high above the Y103 mark. The US Dollar rose against the Yen on speculation that the BoJ's may expand its already massive economic stimulus. The gains in the US dollar were further supported after data showed that the US manufacturing sector expanded at its fastest pace in 2-1/2 years last month while construction spending rose in October. The greenback was buying 103.22 yen in Tokyo on Tuesday, up from 102.94 yen in New York.
Export related shares gained the most in Tokyo market as yen weakening against the U.S. dollar bolstering their overseas earnings prospect when they repatriate it home. Shares of Mazda Motor Corp paced advancers in the auto sector, with their climb of 1.7% to 490 yen. Among tech names, Fujifilm Holdings Corp rose 3% to 2855 yen and TDK Corp rose 1.4% to 4800 yen.
Sekisui Chemical Co. jumped 7.5% to 1,298 yen on reports the company developed a silicon-based cheaper and longer-lasting material for use in lithium-ion car batteries used in electric vehicles that can store three times as much power as existing cells.
Nippon Paper Industries Co. gained 5.7% as Credit Suisse Group AG raised the stock's target price. Credit Suisse lifted its target price to 2,100 yen from 1,600 yen.
Oji Holdings Corp. gained 2.5% to 495 yen after Credit Suisse raised the target price to 570 yen from 500 yen.
In China, shares in the Chinese financial market climbed up, with the Shanghai Composite up by 15.30 points to finish at 2222.67, on calming jitters over liquidity squeeze after the central bank's injection via open market operations.
The People's Bank of China added more short-term funding via 18 billion yuan in seven-day reverse repos to the interbank market earlier in the morning in a bid to calm nerves about its plans to force the financial system to deleverage. It also kept the yield of the seven-day reverse repos flat at 4.1%. The Chinese yuan remained quite stable in recent days after PBOC Vice Governor Yi Gang said last week the yuan is very close to the equilibrium level and repeated the PBOC would keep the yuan basically stable.
Investors' wariness liquidity drain resurfaced in China after the securities watchdog announced on Saturday that China will resume initial public offerings in January after a freeze of more than a year. The watchdog also unveiled a reform plan for new listings that's aimed at boosting the country's stock market over the long term. China's securities regulator, which has banned IPOs for more than a year to reduce fraud and prevent a flood of supply from dragging down the market, said on Nov. 30 that 50 companies will be ready for new share sales by the end of January. Policy makers are lifting the ban amid a 12% rally in the Shanghai Composite from this year's low in June, signs of a pickup in economic growth and pledges by the ruling Communist Party to increase the role of markets.
Shares of steelmakers were up on reports China's Ministry of Industry and Information Technology is studying setting up steel production capacity quota trading to help curb overcapacity. Baoshan Steel, the biggest-listed steelmaker, rising 1.9% to 4.29 yuan. Angang Steel Co. surged 2.8% to 3.33 yuan.
Shares of Chinese cement makers went up, on the back of brokerage reports stating cement prices rose in Chinese cities and provinces including Shanghai, Henan, Jiangsu and Zhejiang. Anhui Conch Cement, the nation's biggest producer of the building material, rose 3.4% to 18.47 yuan. Huaxin Cement Co. added 5.5% to 12.89 yuan.
The purchasing managers index (PMI) for China's non-manufacturing sector stood at 56% in November, down from 56.3% for October, according to official data from the National Bureau of Statistics (NBS) and the China Federation of Logistics and Purchasing (CFLP). A PMI reading above 50% indicates expansion, while a reading below 50% indicates contraction. The non-manufacturing PMI tracks service, construction, software, aviation, railway transport and real estate among other sectors.
China's manufacturing PMI was 51.4% in November, the same as that in October and the highest for 19 consecutive months, showed NBS figures on Sunday. The sub-index for new orders dropped 0.6%age points to 51% in November. But the sub-index for new export orders gained 0.5%age points to 49.9% in November, though it was still in contraction territory. The sub-index for employment stood at 51.9%, up 0.4%age points from October.
The State Information Center (SIC), a government think tank, has forecasted that China's economy is expected to expand 7.6% in 2013 and then edge down to around 7.5% in 2014. The SIC advised the central government to set the economic growth target for 2014 at 7% in an effort to focus more effort on reform and adjusting the economic structure. It also advised maintenance of a proactive fiscal policy and prudent monetary policy. The SIC said there may be more pressure to control consumer inflation in 2014 with the consumer price index (CPI) expected to rise 3.2% from 2013. Housing prices may rise 5% in the coming year, defying government effort to rein in runaway prices, but a rapid decline in housing prices if local government debt is not properly handled cannot be ruled out. China's economy grew 7.7% in the first three quarters of the year, keeping it on track to meet this year's target of 7.5%.
In Hong Kong, shares in HK market declined, weighing the benchmark Hang Seng Index down 128.08 points to 23910.47 while the Hang Seng China Enterprises Index lost 99.72 points to 11448.35. The decline in the HK bourses came due to host of negatives, including the decline of China's non-manufacturing PMI for November, the scaled back of the PBoC's reverse repurchase, and the first confirmed case of H7N9 flue in HK.
Hong Kong is on public-health alert after the city confirmed its first human case of the deadly H7N9 bird flu, with an Indonesian domestic worker hospitalized in critical condition.
Among the HK 50 blue chips, 11 stocks rose and 39 fell. Sands China advanced 2.5% to HK$61, while Hengan International Group Co lost 2.1% to HK$95.65, making themselves the top blue-chip gainer and loser.
Property shares fell as Hong Kong's Financial Secretary John Tsang Chun-wah said Monday that risks of a property bubble ensure the government will continue enacting cooling measures for the sectors. Shares of China Resources Land fell 1.2% to HK$21.20, Guangzhou R&F Properties Co fell 1.3% to HK$ 12.08 and Sino Land Co dropped 1.5% to HK$1.39.
Macau gaming players rose across the board as the November gross gaming revenues increased 21% year-on-year. Sands China (01928) and Galaxy (00027) gained 2.5% and 1.6% to HK$61 and HK$62.3.
In India, Indian benchmark indices finished lower as Asian and European stocks dropped as signs the US economy is strengthening fuelled speculation that the Federal Reserve will soon start tapering monetary stimulus to the US economy. The barometer index, the S&P BSE Sensex, was provisionally down 42.80 points or 0.2%, off close to 70 points from the day's high and up close to 40 points from the day's low. Among the 30-share Sensex pack, 19 stocks fell and rest rose.
Banks stocks witnessed selling pressure. ICICI Bank (down 0.17%) and HDFC Bank (down 0.53%) declined. Among PSU bank stocks, State Bank of India (SBI) (down 0.34%), Bank of Baroda (down 0.24%), Bank of India (down 3.47%), Federal Bank (down 0.13%) and Union Bank of India (down 1.7%), edged lower.
State-run GAIL (India) rose 3.37% after the company said that Prime Minister Dr. Manmohan Singh, has today, 3 December 2013, dedicated to the nation GAIL (India)'s 1,000 km-long natural gas pipeline from Dabhol in Maharashtra to Bangaluru in Karnataka during the inaugural ceremony of the 8th Asia Gas Partnership Summit (AGPS).
Elsewhere in the region, New Zealand's NZX50 index fell 0.18%. Indonesia's Jakarta Composite index sank 0.77%. South Korea's KOSPI fell 1.05%. Taiwan's Taiex index dropped 0.26%. Singapore's Straits Times index fell 0.03%. Malaysia's KLSE Composite rose 0.34%.
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