Asian Stocks Rise as U.S. Manufacturing Expands; Dollar Gains

By Clyde Russell and Shani Raja
Feb. 2 (Bloomberg) -- Asian stocks climbed from a two-month low after a report showed U.S. manufacturing expanded more than estimated and as commodity prices advanced. The Australian dollar dropped after the central bank unexpectedly left interest rates unchanged.
The MSCI Asia Pacific Index gained 1 percent to 117.41 as of 5:10 p.m. in Tokyo following a 1.4 percent increase in the Standard & Poor’s 500 Index yesterday in New York. S&P 500 futures fell 0.2 percent. The Dow Jones Stoxx 600 dropped 0.1 percent to 248.07 at 8:10 a.m. in London. The dollar traded near the highest level in almost seven months against the euro amid concern Greece will struggle to reduce its deficit.
U.S. manufacturing expanded in January at the fastest pace since August 2004, boosting confidence that the economy is recovering from the worst recession since World War II.
Australia’s central bank kept its benchmark interest rate unchanged, ending a streak of three consecutive increases, to gauge the strength of an economic recovery.
"Markets overall were as oversold as they had been for some months and a bounce was expected," Prasad Patkar, who helps manage $1.5 billion at Platypus Asset Management in Sydney.
"The world is a markedly better place, in an economic sense, than it was 12 months ago so there is good reason to believe the market will stay bid."
Japan’s Nikkei 225 Stock Average advanced 1.6 percent to 10,371.09. Australia’s S&P/ASX 200 Index climbed 1.8 percent.

Canon, BHP Rise

Canon Inc., which gets 28 percent of revenue from the Americas, added 2.7 percent in Tokyo. BHP Billiton Ltd., the world’s largest mining company, rose 3.2 percent in Sydney.
Toyota Motor Corp. gained 4.5 percent after saying it will resume some production operations that were halted following an accelerator pedal problem in 2.3 million vehicles.
The Institute for Supply Management’s factory index rose to 58.4, exceeding the highest estimate in a Bloomberg News survey of economists. Readings greater than 50 signal expansion.
Incomes climbed 0.4 percent, also more than expected, according to the Commerce Department in Washington.
The dollar strengthened to as much as $1.3933 versus the euro in Tokyo. The greenback reached $1.3853 yesterday in New York, the strongest level since July 8. The greenback fetched
90.74 yen from the 90.61 yen close in New York. The Japanese currency reversed its loss on the day against the euro, trading at 125.88 per euro from 126.24 yesterday when it hit 124.43 yen, the highest level since April 28.
The European Union will issue a review of Greece’s budget- cutting plans tomorrow. The nation’s deficit program is "very ambitious and this will need to be implemented under difficult circumstances," EU Economic and Monetary Affairs Commissioner Joaquin Almunia said in an interview yesterday in Brussels.

Greece Contagion

"European policy makers seem to be worried that Greece’s problems may spread," said Yuji Saito, director of the foreign- exchange department at Calyon Bank in Tokyo. "This is putting a brake on any gains in the euro."
The so-called Aussie fell against all of its 16 most-traded counterparts after Reserve Bank Governor Glenn Stevens left the overnight cash rate target at 3.75 percent in Sydney. All 20 economists surveyed by Bloomberg News forecast a quarter-point boost. Futures traders estimated a 74 percent chance of an increase. The Australian currency weakened as much as 1.5 percent to 87.85 U.S. cents from 89.14 cents in New York.
The decision suggests Stevens and his board may keep borrowing costs unchanged in coming months to gauge the economic impact of previous increases. Business confidence, particularly among retailing companies, fell in December to the lowest level in six months, a report showed today.

Australian Pause

"The decision will bring the currency back to a degree, but the Reserve Bank hasn’t gone away," said Stephen Roberts, a senior economist at Nomura Australia Ltd. in Sydney. "This is purely a pause, certainly not a sign that they’re finished."
Crude oil extended gains in New York after rising the most in four weeks yesterday as the U.S. manufacturing data boosted optimism that fuel use in the world’s biggest energy-consuming country will gain. Oil for March delivery rose 23 cents to
$74.66 a barrel in electronic trading on the New York Mercantile Exchange.
"We can see that manufacturing is improving," said Jonathan Barratt, managing director at Commodity Broking Services Pty in Sydney. "We now want to see that number backed up with good fundamentals in the inventory data."
Copper climbed from a 10-week low in Shanghai, as recent declines lured buyers from China, the world’s largest consumer.
The May-delivery contract on the Shanghai Futures Exchange rose as much as 2.2 percent to 55,500 yuan ($8,129) a ton, after plunging to the lowest level since Nov. 19 yesterday.
The cost of protecting Asian corporate and sovereign bonds from non-payment dropped, according to traders of credit-default swaps. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan fell 3.5 basis points to 111.5 basis points, Citigroup Inc. prices show.
A decline would be the risk benchmark’s first since Jan. 25, when it fell 4.7 basis points, according to prices from CMA DataVision in New York.