China PMI offers tiny relief to Asia as stocks head for dire end to quarter

By Wayne Cole and Alun John

SYDNEY/HONG KONG (Reuters) - Asian shares were set to close out a calamitous quarter by eking out a small rally on Tuesday as factory data from China held out the hope of a revival in activity, even as much of the rest of the world shut down.

China's official manufacturing purchasing managers' index (PMI) bounced to 52.0 in March, up from a record-low 35.7 in February and topping forecasts of 45.0.

Analysts cautioned the underlying activity probably remained well below par as the improvement measures the net balance of firms reporting an expansion or contraction. China's National Bureau of Statistics also warned that the rebound didn't signal a stabilization in activity, and was partly due to the very low base in February.

"The fact that the numbers were not in the 60s shows that this is not going to be a V shaped recovery," said Cliff Tan East Asia head of global markets research at MUFG.

The number was enough of a relief though to help MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) rise 0.94%. That still left it down 22% for the quarter, its worst performance since 2008.

Gains were modest at best. Shanghai blue chips (CSI300) rose 0.4% and South Korea (KS11) 1.87%. Japan's Nikkei (N225) eased 1%, to be down 20% since the start of the year.

E-Mini futures for the S&P 500 (ESc1) were flat, EUROSTOXX 50 futures (STXEc1) rose 0.7% while FTSE futures (FFIc1) fell 0.25%.

Healthcare had led Wall Street higher, with the Dow (DJI) ending Monday up 3.19%, while the S&P 500 (SPX) gained 3.35% and the Nasdaq (IXIC) 3.62%.

News on the coronavirus remained grim but radical stimulus steps by governments and central banks have at least provided some comfort to economies.

Infections in hard-hit Italy slowed a little, but the government still extended its lockdown to mid-April. California reported a steep rise in people being hospitalized, while Washington state told people to stay at home.

Trade ministers from the Group of 20 major economies agreed on Monday to keep their markets open and ensure the flow of vital medical supplies.

OIL OVERWHELMED

Portfolio management also played a part in the forex market where many fund managers found themselves over-hedged on their U.S. equity holdings given the sharp fall in values seen this month, leading them to buy back dollars.

That saw the euro ease back to $1.1015 (EUR=), from a top of $1.143 on Monday, while the dollar index bounced to 99.34 (=USD), from a trough of 98.330.

"Month‑ and quarter‑end rebalancing amid relatively thin liquidity was the major driver of currency markets in the Asia session," said analysts at CBA in an note.

Demand for dollars from Japanese funds saw the dollar inch up to 108.45 yen , though it remained some way from last week's peak at 111.71.

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Oil prices steadied, after diving to the lowest in almost 18 years on Monday as lockdowns for the virus squeezed demand even as Saudi Arabia and Russia vied to pump more product.

U.S. crude added $1.12 to $21.2, while Brent crude futures gained 28 cents to $23.01 a barrel.

In a new twist, U.S. President Donald Trump and Russian President Vladimir Putin agreed during a phone call on Monday to have their top energy officials meet to discuss slumping prices.

"However, the reality is that the level damage to demand is likely to overwhelm any production cut agreement between major producers," wrote analysts at ANZ in a note.

"The lockdown of cities around the world and the shutdown of the aviation industry will cause a fall in demand the industry has never seen before."

In the gold market all the talk has been of a rush of demand for the physical product amid shortages in coins and small bars. Flows into gold-backed ETFs have ballooned by $13 billion so far this year, the most since 2004.