Asian shares pared earlier steep losses on Monday after Chinese markets rallied as investors focused on some of the bright spots in separate surveys of Chinese factory activity.

Financial spreadbetters expected a brighter start to European trading, with Britain’s FTSE 100 seen opening as much as 0.5 per cent higher, Germany’s DAX 0.4 per cent, and France’s CAC 40 up 0.5 per cent.

Persistent fears about Greece’s financial situation are likely to limit the gains, and last week’s downbeat US data is seen making investors wary.

MSCI’s broadest index of Asia-Pacific shares outside Japan was nearly flat in late afternoon trading, after early dropping to its lowest intraday level since April 7.

The CSI300 index of the largest listed companies in Shanghai and Shenzhen as well as the Shanghai Composite Index were both surging more than 4 per cent as market participants took stock of the surveys as well as domestic media commentary asserting the bull market has not yet ended.

Major state-backed newspapers carried front-page articles saying despite the tumble on Thursday, when main indexes shed more than 6 per cent, the foundations of the bull market remain unchanged.

China's manufacturing PMI

China’s official manufacturing Purchasing Managers’ Index (PMI) edged up to 50.2 from April’s 50.1, matching the expectations of economists polled by Reuters, but also suggested Beijing might have to take additional steps to spur growth.

The final HSBC/Markit PMI was also released and showed a reading of 49.2 in May, shrinking for a third straight month and below the 50-point level that separates an expansion from a contraction in activity on a monthly basis. The private survey showed export orders contracted at the sharpest rate in nearly two years.

“The PMI figures, both the official one and the HSBC one, were very close to the consensus view and they can be interpreted as a further normalisation in the economy,’’ Gerry Alfonso, director of Shenwan Hongyuan Securities Co, wrote in a note.

A separate official survey of China's non-manufacturing PMI edged down to 53.2, compared to April's 53.4, showing that growth in the country’s services industry cooled last month.

Japanese PMI, meanwhile, showed an improvement. The Markit/JMMA final Japan Manufacturing PMI rose to a seasonally adjusted 50.9 in May, unchanged from the preliminary reading but higher than a final 49.9 in April.

Japan’s Nikkei stock index eked out a tiny gain to give it a 12th straight gaining session, its longest streak sense 1988.

US stocks

On Wall Street on Friday, major US indexes posted monthly gains but daily losses after the University of Michigan’s consumer sentiment marked a drop, while the Institute for Supply Management-Chicago Business Barometer unexpectedly fell.

The US government also revised its first-quarter gross domestic product estimate to show GDP contracted at a 0.7 per cent annual rate instead of the 0.2 per cent growth pace it estimated last month.

That was slightly better than economists’ expectations for a drop of 0.8 per cent, but still underscored the fact that the recovery stalled early this year, and the Federal Reserve policymakers might wait longer to raise US interest rates until they have more confidence in the economy’s momentum.

The figures weighed on US Treasury yields, curbing the greenback’s recent rally against the yen. It stood at 124.20 in early trading, nearly flat on the day and below its more than 12-year peak of 124.46 yen scaled last week.

Greece debt crisis

Greece’s woes weighed on the euro, which slipped about 0.4 per cent to $1.0951. That helped an index tracking the dollar against a basket of currencies gain about 0.2 per cent to 97.114.

Greece and its European creditors agreed on the need to reach a cash-for-reforms deal quickly as Athens missed a self-imposed Sunday deadline for reaching an agreement to unlock aid, sources close to the talks said.

“It’s difficult to quantify how much the currency market has factored in the possibility of Greece missing the June 5 repayment deadline,’’ said Shinichiro Kadota, chief Japan forex strategist at Barclays in Tokyo.

“Greek debt yields provide only a rough guide, and although a missed deadline will not spell default, market concern remains high,’’ he said.

Crude oil

In commodities trading, crude oil surged nearly 5 per cent on Friday but started the week on a subdued note, as rising OPEC output and an expectation that the group would keep production high added to sentiment that the market remained over supplied despite ongoing falls in US rig operations.

US crude futures fell about 0.8 per cent to $59.85 per barrel, while Brent shed about 0.5 per cent to $65.26.