Manufacturing rebound pushes Asian shares to 7-month highs

Asia shares extended their rally on Tuesday as positive factory activity surveys from China and the US provided a much-needed boost to investor confidence.

European shares were expected to rise, London's FTSE futures up 0.1 per cent, and Frankfurt's DAX futures also trading slightly higher.

MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.2 per cent, hitting a seven-month high after rallying more than one per cent in the previous session.

Australian shares gained 0.4 per cent after the Reserve Bank of Australia held interest rates steady at its April policy meeting - as widely expected.

Japan's Nikkei bucked the trend, ending flat after paring earlier gains.

The Shanghai Composite Index and Hong Kong's Hang Seng Index also traded higher, climbing 0.4 per cent and 0.1 per cent, respectively.

Wall Street shares jumped on Monday, with the S&P 500 and Dow Jones Industrial Average both rising more than one per cent, with the Dow lifted by sharp gains in Caterpillar Inc and Boeing Co.

Investors cheered US data overnight showing improvements in manufacturing activity last month and construction spending for February, which overshadowed an unexpected drop in retail sales.

The upbeat readings reinforced positive sentiment garnered from earlier data showing China's manufacturing sector surprisingly returned to growth for the first time in four months in March.

The rare bright news for the global economy comes in the wake of persistent worries over cooling demand across the world, with the Sino-US tariff war, slowing trade and subdued corporate profits prompting investors to dump risk assets over the past several months.

“The market is reacting to the improvement of sentiment in China. Many investors are buying in anticipation of a rise in shares,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

Fujito said he expected the market will need to catch up with consumer sentiment in the US at some point as the below-par retail sales figures indicated it was not as good as thought.

The encouraging data on manufacturing activity in the world's two biggest economies helped put a damper on concerns over a deepening slowdown in the global economy, spurring some investors to scale back holdings of safe-haven US bonds.

That selling on Monday triggered the biggest single-day jump in US 10-year Treasury note yields since January 4, with yields reaching as high as 2.508 per cent.

The overnight rise pushed the yield curve between three-month US Treasury bills and 10-year notes further into positive territory, after being inverted for a week until last Friday, raising fears that it could herald a recession.

On Tuesday, the 10-year Treasury yield was last at 2.475 per cent.

BREXIT CHAOS

In the currency market, bitcoin at one point soared more than 22 per cent to trade as high as $5,080 on the Luxembourg-based Bitstamp exchange for a 2019 high.

The upward swing saw the world's largest cryptocurrency break through its 200-day moving average for the first time in more than a year. The value of the unit plunged last year, as authorities globally tightened their regulation on the market.

Sterling took a knock after British lawmakers came no nearer to resolving the chaos surrounding the country's departure from the European Union.

The British parliament failed on Monday to find a majority for any proposed alternative to Prime Minister Theresa May's divorce deal, though support for an alternative that included a customs union was far higher than for May's deal.

“The only sensible thing for Theresa May to do is to step aside and let someone else take control of Brexit,” said Naeem Aslam, chief market analyst at Think Markets in London, said in a note to clients.

Sterling was last down a quarter of a per cent at $1.3074 , not far from last month's nadir of $1.2945. The euro struggled near a three-week low of $1.1198 brushed early on Tuesday, and was last trading down 0.1 per cent at $1.1207. Against the Japanese yen, the dollar was down a tad at 111.33 yen, but 1.5 per cent above its 1-1/2-month low of 109.70 touched on March 25.

Oil prices rose to fresh 2019 highs after a US official said Washington is considering more sanctions on Iran and a key Venezuelan export terminal halted operations.

US crude futures traded at $61.82 per barrel, up 0.4 per cent on the day. Brent futures were up 0.3 per cent at $69.19 a barrel. Gold inched up to $1,288.30.

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