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Manufacturing rebound boosts investor confidence

by Paul

Manufacturing rebound lifted Asian shares to 7-month highs as positive Chinese and U.S factory activity surveys aided investor confidence

Asia shares extended their rally on Tuesday as positive Chinese and U.S factory activity surveys aided investor confidence, and the ebbing concerns over the global economy spurred selling of safe-haven U.S. bonds as yields rose from 15 month troughs.

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

Australian shares gained half a percent and Japan’s Nikkei advanced 0.3 percent, extending its gains for a third session.

The Shanghai Composite Index climbed 0.1 percent while Hong Kong’s Hang Seng Index was flat.

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

Investors cheered U.S. 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-U.S. 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 United States 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 spurred some investors to scale back holdings of safe-haven bonds, triggering the biggest single-day jump in U.S. 10-year Treasury note yields since Jan. 4.

The U.S. 10-year Treasury yield was last at 2.479 percent, not far off a more than one-week high of 2.508 percent brushed overnight.

The rise pushed the yield curve between three-month U.S. 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.

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