Shares in China gain after HSBC services PMI, ASX off on retail sales

Investing.com - Shares in greater China Wednesday rose on an upbeat services PMI for April in China that gave optimism on domestic-led demand.

The Shanghai Composite rose 1.27% just before the break, while the Hang Seng index gained 0.85%. In Sydney, the S&P/ASX 200 fell 1.46% as retail sales disappointed.

In China, second to India in gold purchases, the April HSBC services PMI rose to 52.9, a four-month high. The PMI was at 52.3 in March.

"The latest set of PMI data indicated that Chinese service-sector companies had a strong start to Q2 with activity and new orders both rising solidly in April. However, a downturn in manufacturing operating conditions led to a weaker expansion of overall business activity in April with composite output rising at the slowest rate in three months," Markit economist Annabel Fiddes said.

"Furthermore, sustained job shedding at manufacturing firms offset a modest rise in service-sector staff numbers leading total employment to fall for the second month in a row. This suggests that, despite recent stimulus measures such as cuts to banks' reserve ratios and lending/deposit rates, more measures may be required to ensure the economy does not slow further from the 7% annual pace of growth registered in Q1."

In Australia, March retail sales rose 0.3% month-on-month, weaker than the 0.4% gain seen.

Japanese markets are closed again today as they mark Constitution Day public holiday, and the final day of the so-called Golden Week period.

Overnight, U.S. stocks were lower after the close on Tuesday, as losses in the Utilities, Technology and Telecoms sectors led shares lower.

At the close in New York, the Dow Jones Industrial Average fell 0.79%, while the S&P 500 index lost 1.18%, and the NASDAQ Composite index declined 1.55%.

On Tuesday, the U.>S saw a soft batch of economic data.

The U.S. trade deficit in March soared to its highest level in more than six years, as a prolonged labor dispute at critical West Coast ports and the stronger dollar weighed heavily on foreign trade.

In its monthly report, the U.S. Department of Commerce said the nation's trade deficit surged 43.1% to $51.4 billion, its highest level since Fall, 2008. The percentage increase was also the highest since December, 1996. Gold reached a session-high of 1,199 after the release.

When adjusted for inflation, the deficit rose $16 billion to $67.2 billion in March, up from $51.2 billion a month earlier. March exports rose modestly to $187.8 billion, while imports skyrocketed by more than $17 billion to $239.2 billion for the month.

The widening of the trade deficit has led to rising concern of a contraction in the economy in the first quarter.

Last week, the Commerce Department said GDP for the first quarter rose by 0.2%, in line with paltry estimates from the Federal Reserve of Atlanta. A surge in exports reflecting the stronger dollar served as the heaviest drag on GDP growth, the Commerce Department said.

Following its April meeting last week, the Federal Open Market Committee reiterated that it will take a data-driven approach to the timing of its first interest rate hike since the end of the Financial Crisis.

Gold, which is not attached to interest rates or dividends, struggles to compete with high yield-bearing assets in periods of rising rates.

Elsewhere, Markit's Purchasing Managers Index (PMI) fell to 57.4 in April, below a preliminary reading of 57.8 earlier in the month. In March, the PMI soared to 59.2 the highest level since August.

Separately, the Institute of Supply Management reported that its non-manufacturing purchasing manager's index increased to 57.8 last month, above forecasts of 56.2 and up from 56.5 in March.