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GLOBAL MARKETS-China shares pick up, Aussie dollar falls

Published 09/01/2009, 02:40 AM
HG
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* Shanghai stocks pick up after rout, regional shares firm

* PMI surveys show China economy maintaining upward momentum

* Aussie dollar falls as c. bank says low rates appropriate

* Euro gains ground as German retail sales beat forecasts (Repeats to more subscribers)

By Susan Fenton

HONG KONG, Sept 1 (Reuters) - Chinese shares bucked up on Tuesday after Monday's rout, helped by upbeat economic data, but the Aussie dollar fell after the central bank dashed expectations it would shift to a tighter policy bias.

Major European stock futures were up 0.7 percent and the euro firmed to $1.4370 after better-than-expected German retail sales.

U.S. equity futures were 0.3 percent higher, following gains in Asia and some signs of stabilisation in Chinese markets.

Shares in Shanghai were up 0.7 percent by mid-afternoon after plunging nearly 7 percent in the previous session -- their worst one-day loss since mid-2008 -- on persistent fears the government is reining in bank lending to head off potential asset bubbles.

Stocks elsewhere in Asia posted modest gains, with investors keeping a wary eye on Chinese markets, although Taiwan's benchmark share index jumped 2.8 percent on the day on bullish earnings from the tech sector.

Investors in China were buoyed by data showing the Chinese economy maintained its upward momentum in August, with two purchasing managers' indexes rising to their highest levels in 16 months.

"We're seeing an improvement in the PMI consistent with an economy still gaining momentum in August," said Glenn Maguire, Societe Generale's Chief Asia Economist.

"If you look at the global suite of data for July, which were more or less strong, China continues to be in the vanguard of that trend."

Japan's Nikkei closed up 0.4 percent, helped by the stronger tone in Shanghai, but gains were limited by a firm yen which put pressure on some exporters.

The yen remained close to 7-week highs reached on Monday in the wake of the Democratic Party's landslide election victory.

The MSCI index of Asia Pacific stocks traded outside Japan rose 1.4 percent.

The index, like other major global benchmarks, has sputtered in recent weeks on fears that a six-month equity rally has run too far ahead of economic fundamentals, but it is still up nearly 50 percent so far this year.

BILL FUTURES RALLY

Australia's central bank sent the Aussie dollar sliding by saying the current low level of Australian interest rates, at a record low of 3 percent, was appropriate.

That dashed some expectations it would shift to a tighter monetary bias. The Australian dollar fell 0.2 percent on the day to $0.8418, after edging up close to last month's 11-month peak ahead of the central bank's statement.

"It sounds like the RBA doesn't want to bang the drum about rate hikes," Rory Robertson, interest rate strategist at Macquarie, said after the meeting.

"Yes, the economy is in much better shape than anyone thought a few months ago. But it's not like it needs to be restrained, either."

Australian bill futures rallied as investors scaled back the chance of a rate rise in October.

Across the region, there was lingering concern that while economic data may be improving, the strength of a global economic recovery is still in doubt.

That was reinforced by a sharper-than-expected 20.6 percent drop in South Korea's exports in August -- extending double-digit annual declines to a 10th straight month -- although equity investors took the data in their stride.

Korea's benchmark KOSPI index finished 2 percent higher, helped by a 7.6 percent surge in shares of Hyundai Motor and a 4.7 percent gain in Kia Motors on the view that broader recent data suggests the economic environment is improving.

In Taiwan, Hon Hai, the world's largest electronics maker, led technology shares higher, surging 6.8 percent after its quarterly profit beat forecasts

Commodities markets were more nervous amid concern about Chinese demand, but London copper recovered some losses after sliding more than 3 percent in early trade after a holiday on Monday.

U.S. crude futures hovered around $70 a barrel after sliding almost 4 percent on Monday on fears that Chinese lending curbs would cool its economic recovery and keep a lid on energy demand. (Editing by Kim Coghill)

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