Shares in Asia gain as investors eye China policy response to weak PMI

Investing.com - Greater China shares gained on Monday despite a weaker than expected manufacturing survey as investors said theey expect a policy response by Beijing.

The Hang Seng index rose 0.39%, while the Shanghai Composite gained 0.85%. In Sydney, the S&P/ASX 200 rose 0.15%.

The HSBC (LONDON:LONDON:HSBA) manufacturing survey for China fell to 48.9 in April, well below the 49.4 level seen and down from 49.2 in March.

"China's manufacturing sector had a weak start to Q2, with total new business declining at the quickest rate in a year while production stagnated," said Annabel Fiddes, economist at Markit.

"Fewer new orders appeared to stem from weaker domestic demand, as new business from abroad showed tentative signs of improvement. Nonetheless, further job cuts and reduced purchasing activity suggest that the sector may struggle to expand in the near-term. Furthermore, the PMI data indicate that more stimulus measures may be required to ensure the economy doesn't slow from the 7% annual growth rate seen in Q1."

Since November, the People's Bank of China has introduced a series of stimulus measures, including lowering interest rates twice and cutting the reserve requirement ratios of major banks twice, in order to spur economic activity and boost growth.

But earlier, Australia building approvals jumped 2.8% in March month-on-month, beating a drop of 2.0% seen, but the overall trend is in line with the Reserve Bank's forecast for strong growth in dwelling investment in the coming quarters.

On Monday, markets in Japan and in the U.K. are to remain closed for holidays.

Last week, stocks on the U.S. equities markets snapped back on Friday, rallying from Thursday's massive sell-off to open the start of May trading on a strong note.

The Dow Jones Industrial Average, the NASDAQ Composite index and the S&P 500 Composite index all moved broadly higher by more than 1%, following a relatively modest performance in the month of April. The Dow gained 183.54 or 1.03% to close the week at 18,024.06, while the NASDAQ rose 63.97 or 1.29% to 5,005.39, ending a four-day losing streak.

The S&P, meanwhile, gained 22.78 or 1.09% to 2,108.29, as stocks in the Basic Materials, Consumer Services and Technology sectors led. For the session, nine out of 10 sectors closed higher with only Telecommunication stocks in the red.

Data last week showed that the U.S. economy grew just 0.2% in the three months to March, slowing from 2.2% in the final quarter of 2014. It was the slowest rate of growth in a year.

The weaker-than-expected data prompted investors to push back expectations on the timing of an initial rate hike by the Federal Reserve to later this year from midyear.

In its rate statement on Wednesday the Federal Reserve said recent indications of a slowdown in growth were probably due to “transitory factors.”

In the week ahead, investors will be focusing on Friday’s U.S. nonfarm payrolls report, for a fresh indication on the strength of the economic recovery. A central bank meeting in Australia and service sector reports from the U.S., U.K., China and the euro zone will also be closely watched.

On Monday, the euro area is to produce revised data on manufacturing activity.

Later in the day, the U.S. is to publish figures on factory orders.