China PMI Report Helps Stocks Extend Gains

Improvement in a closely watched private gauge of manufacturing in China helped Asian shares extend early gains Tuesday.

The reading from Caixan and IHS Markit, to which foreign investors give greater credence versus the government's gauge, rose for a second straight month in July and hit the highest level since March. In contrast, Monday's government reading slowed slightly.

"Today's unofficial PMI suggests that manufacturing activity has held up better than previously thought and points to a pickup in economic growth last month," said Julian Evans-Pritchard at Capital Economics.

Chinese stocks were already higher ahead of the report, and the Shanghai Composite Index finished morning trading up 0.4% after four consecutive sessions of gains to put it just below 2017's closing high.

Tuesday's PMI reading added to a litany of positive data points coming from Asia of late. That includes upbeat earnings reports. But there has been some concern of late that declines in the U.S. dollar, near its lowest levels in a year, could crimp future results. A weaker dollar could make Asian exports less competitive over time.

In Hong Kong, the Hang Seng Index hit fresh two-year highs, rising 0.8% and moving closer to 2015's peak. That as an index of large Chinese stocks listed in Hong Kong jumped 1.8%.

Those so-called H-shares are beneficiaries of a stronger yuan, said Caroline Maurer at BNP Paribas Asset Management, as mainland investors find it cheaper to buy stock in Hong Kong than on the mainland.

Commodities also continued to climb Tuesday, led again by a 2% to 3% gain in Chinese iron-ore and steel-rebar prices. Global and U.S. oil benchmarks also added to more than a week straight of gains in Asia.

That all helped push Australia's S&P/ASX 200 up 0.7% after the index lagged once again in July. Commodities-focused stocks were posting outsize gains, with Woodside Petroleum rising 2.2%.

The latest policy statement from Australia's central bank is due later Tuesday. While no policy change is expected, the focus is on how hard commentary might be regarding the Australian dollar's recent gains.

The currency is well above the central bank's "equilibrium level," National Australia Bank says. The Australian dollar rose some 0.3% versus most major currencies ahead of the statement.

Korean stocks were also strong on Tuesday. The Kospi, which had been logging record highs before a pause capped by Friday's 1.7% slide, its biggest of 2017, rebounded 1% amid gains in index heavyweight Samsung as well as carriers Asiana and Korean Air.

Japan's Nikkei, though, rose just 0.3% as Tokyo equities continued to be capped by the weaker dollar; it was recently around Yen110.19 and after overnight nearing Yen110.00.

Grace Zhu contributed to this article.

Write to Kenan Machado at kenan.machado@wsj.com

(END) Dow Jones Newswires

August 01, 2017 00:37 ET (04:37 GMT)