Unexpected Rise In China PMI, Japans Tankan soft

 | Apr 01, 2015 06:14AM ET

h2 Market Brief

In the Asian session, the big story was the strong performance of Chinese shares. While the majority of Asian equity markets underperformed Shanghai and Shenzhen were higher by 1.4% and 1.8% respectively (Hang Seng rose 0.71%). In particular, the Shanghai composite looks to close above 3800 key psychological resistance. The catalyst for optimism over China stocks was the China’s official PMI unexpectedly rising above the 50 threshold to 50.1 in March from 49.9, verse expectations for decline to 49.7. Most sub-indices’ improved, yet new orders index slowed by 0.2 to 50.2 and new export orders index dropped by 0.2 to 48.3. Elsewhere, China’s non-manufacturing PMI moderated to 53.7 in March from 53.9 in February. There is growing evidence that Beijing’s proactive stimulus response is now starting to pay-off in growth. The PBoC USD/CNY fix was slightly higher to 6.1434 from 6.1420. We remain constructive on the CNY, based on expectation that policy makers will provide excessing response to slowing growth and attempts to manage currency volatility. However, in a potential setback in CNY aspirations, US Treasury Secretary Jack Lew stated that the USA believed the CNY had not become freely traded enough to be included IMF basket of global currencies (SDR). Six world powers and Iran negotiations went past the 31st March deadline, unable to achieve an accord on Tehran's nuclear program. But the extension indicates positive developments in discussions. Brent crude was marginally softer falling to $54.78 from $56.