Asian shares mixed, but Shanghai up off mild gain in HSBC PMI

Investing.com - Shares in Shanghai gained on Thursday near the break as investors saw some reasons to cheer on a slightly higher assessment of manufacturing in China by HSBC and signals showed the Federal Reserve was unlikely to raise interest rates in June.

The Shanghai Composite rose 0.88%, while the Hang Seng fell 0.07%.

In China, the May HSBC flash manufacturing PMI rose to 49.1, up slightly from a disappointing one-year low of 48.9 in April. The output index fell to 48.4 in the HSBC May survey, a 13-month-low.

"The Flash China Manufacturing PMI pointed to a further deterioration in operating conditions in April, with production declining for the first time in 2015 so far," said Annabel Fiddes, economist at Markit.

"Moreover, softer client demand, both at home and abroad, along with further job cuts indicate that the sector may find it difficult to expand, at least in the near-term, as companies tempered production plans in line with weaker demand conditions. On a positive note, deflationary pressures remained relatively strong, with both input and output prices continuing to decline, leaving plenty of scope for the authorities to implement further stimulus measures if required."

The People's Bank of China has cut interest rates three times since November last year to keep the economy on track.

Overnight, U.S. stocks were mixed after the close on Wednesday, as gains in the Telecoms, Healthcare and Oil & Gas sectors led shares higher while losses in the Consumer Services, Financials and Industrials sectors led shares lower.

At the close in New York, the Dow Jones Industrial Average lost 0.15%, while the S&P 500 index declined 0.09%, and the NASDAQ Composite index climbed 0.03%.

Federal Reserve officials believed it would be premature to hike interest rates in June even though most felt the U.S. economy was set to rebound from a dismal start to the year, according to minutes from their April policy meeting released on Wednesday.

The central bank debated whether a slew of disappointing data, including weak consumer spending, signaled a temporary slump or evidence of a longer-lasting slowdown, with most participants agreeing economic growth would climb to a healthier pace and the labor market would strengthen.

The U.S. economy grew an anemic 0.1 percent in the first quarter, according to the most recent government data.

The minutes from the April 28-29 policy-setting committee meeting also highlighted the quandary the Fed faces in trying to avoid the market volatility tied to a rate hike while sticking to its meeting-by-meeting guidance on when that move will come.

With an increased amount of uncertainty and signs of softness across the economy, the minutes showed Fed officials pushing the prospect of a rate hike later into the year.

"Many participants, however, thought it unlikely that the data available in June would provide sufficient confirmation that the conditions for raising (interest rates) had been satisfied ...," the minutes said.

U.S. Treasury prices were largely unchanged after the release of the minutes, while short-term interest rate futures and TIPS inflation break-even rates held firm, as did stocks.

Fed officials flagged a number of concerns including disappointment that falling oil prices did not spur consumer spending as much as had been hoped. They also cited economic worries in China and Greece.

They also were troubled by the behavior of the bond market, which Fed Chair Janet Yellen spoke about earlier this month. The minutes show central bank officials believe bond market volatility was higher now because of high-frequency traders, decreased inventories of bonds held by broker-dealers, and elevated assets of bond funds.

To avoid a disruptive spike in long-term bond rates, Fed officials discussed whether the central bank should better telegraph a rate hike in post-meeting communications. But most said keeping to the meeting-by-meeting policy was best for now.

The "taper tantrum" of 2013, when emerging-market currencies and stocks plunged en masse on the suggestion that Fed bond-buying could be reduced, has loomed over the central bank as it nears its so-called rate lift-off.

The minutes largely reflected the Fed's April policy statement, which pointed to economic softness but described the slow growth as reflecting, in part, transitory factors such as bad weather and a U.S. port disruption.

Investors now will focus on a Yellen speech on Friday for signs of whether she believes the economy is back on track, or if she nods to the latest batch of weak data.