TOKYO – Asian shares fell on Thursday as China's official and private sector manufacturing PMIs confirmed a recovering growth trend, but failed to convince investors the slowdown was bottoming out.
China's October official PMI rose to 50.2 in October from 49.8 in September, almost matching a forecast 50.3, pointing to expanded factory activity in the world's second-largest economy. The final reading of the HSBC PMI hit an 8-month high of 49.5.
The MSCI index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> fell 0.5 percent after ending October with a 0.5 percent gain, in contrast to September's 5.6 percent rise.
The manufacturing data showed mild improvement in Chinese factory activity helped the index trim losses slightly.
"The return of PMI above 50 suggests economic momentum has indeed picked up. It indicates the effect of policy easing may have been stronger than the consensus expected," Zhiwei Zhang of Nomura wrote in a comment emailed to Reuters.
A Tokyo-based currency trader said markets may not take the figures at face value as they believe the Chinese authorities would not tolerate a bad number ahead of a once-in-a-decade leadership transition which starts to take place this month.
Australian shares dropped 0.8 percent as miners and banks retreated, while South Korean shares <.KS11> slipped 1 percent, weighed by data showing the country's manufacturing sector in October shrank for a fifth consecutive month, although the pace of decline slowed.
The reaction in the Australian dollar, which is sensitive to data from China, its largest export destination, was limited with the currency steadying at $1.0370.
"Overall sentiment is brightening and Chinese orders are suggesting a moderate recovery," said Hirokazu Yuihama, a senior strategist at Daiwa Securities. "But global monetary easing has strengthened currencies of South Korea and Taiwan, where interest rates are relatively higher, hurting their export-led economies and offsetting the general improvement."
Inflation reports from Indonesia and Thailand and India's PMI are among other Asian data due during Thursday's session. Taiwan's October PMI improved to a four-month high as a fall in new export orders slowed.
Japan's Nikkei average <.N225> was up 0.1 percent after a choppy morning trade, as better-than-expected results from the likes of mobile operator Softbank Corp <9984.T> countered a tumble in Panasonic Corp <6752.T> and companies issuing profit warnings.
European stocks dipped after a mixed batch of corporate earnings on Wednesday and U.S. stocks were nearly flat in the wake of storm system Sandy, that caused the market's first weather-related two-day closure since the late 19th century.
CURRENCIES LACK DIRECTION
The dollar gained 0.3 percent against the yen to 80, approaching a four-month high of 80.38 hit last week.
The euro was pinned in the recent $1.28-$1.32 range, trading steady at $1.2965.
Major currencies have been confined to recent ranges as uncertainty over bailouts for Greece and Spain, the pending "fiscal cliff" of tax increases and U.S. government spending cuts, and the tight U.S. presidential election on November 6 have kept markets directionless.
Investors instead focused on third-quarter corporate earnings and outlook amid a lacklustre global economy.
Later on Thursday, investors will be examining the U.S. ISM index of national manufacturing conditions, seen holding above 50 for a second straight month in October, before tuning in to October U.S. jobs numbers due on Friday.
U.S. nonfarm payrolls likely have expanded by 125,000, with the unemployment rate ticking up to 7.9 percent from September's 7.8 percent.
Euro zone finance ministers held a teleconference on Wednesday without any breakthrough on Greece, which said on Wednesday that it will overshoot its deficit and debt targets again next year because of a deeper-than-forecast recession.
Eurogroup chairman Jean-Claude Juncker said he expected a deal at the finance ministers' face-to-face meeting on November 12 provided Greece had completed a list of prior actions.
Brent and U.S. benchmark crude posted losses for October for the second consecutive monthly declines, undermined by slowing global growth and expectations of more North Sea supply.
U.S. crude inched down 0.1 percent to $86.18 a barrel and Brent fell 0.3 percent to $108.35.
Asian credit markets were subdued, with the spread on the iTraxx Asia ex-Japan investment-grade index barely changed from Wednesday.
(Additional reporting by Lucy Hornby in Beijing; Editing by Eric Meijer and Michael Perry)