China Manufacturing Data Prompts Rise in Stocks

Asian stock markets advanced Monday as an expansion in Chinese manufacturing added to hopes the global economy is slowly clawing its way out of recession.

Commodity stocks led the region’s gains as oil neared $68 a barrel and two surveys of Chinese companies showed manufacturing expanded in May, albeit weakly.

But this sliver of hope from the world’s third-biggest economy provided reason enough for markets to build upon the massive gains logged since early March on optimism that the global economy is recovering from a severe slowdown.

The data also added to Friday’s encouraging nuggets — Japan’s industrial production jumping in April and India’s slowdown leveling out in the first quarter — giving investors enough confidence to shrug off the imminent bankruptcy filing of U.S. automaker General Motors Corp., expected later Monday.

It would be the largest industrial bankruptcy in American history and could potentially dent a recovery in U.S. consumer confidence that is crucial to reviving global growth. In an unprecedented move, Washington will pump $30 billion more into GM as it makes its way through bankruptcy court and develops a restructuring plan, officials of President Barack Obama’s administration said late Sunday.

Any signs of deterioration in the U.S. economy, the world’s largest, could send stocks markets into a tailspin, particularly since the recent gains of 30 percent or more may be based on a too sanguine view of the prospects for recovery.

“At current levels the upside is limited and the downside risk is quite high. If there is any negative news from data in the U.S. a correction can be expected,” said Peter Lai, an investment manager at DBS Vickers in Hong Kong.

“The fundamentals haven’t changed. The economic data has improved but is still very bad. This is a liquidity driven rally,” he said. “I’m advising my clients to sell. This isn’t a market for long-term investment.”

Japan’s Nikkei 225 stock average, which has surged 37 percent since early March, was up 155.25 points, or 1.6 percent, to 9,677.75, while Hong Kong’s Hang Seng index shot up 3.5 percent to 18,823.52. South Korea’s Kospi rose 19.21 points, or 1.4 percent, to 1,415.10.

In China, brokerage CLSA Asia-Pacific Markets said its monthly purchasing managers index rose to 51.2 in May from April’s 50.1 on a 100-point scale. Numbers above 50 show an expansion in manufacturing. The state-sanctioned China Federation of Logistics and Purchasing said its own PMI eased slightly to 53.1 from April’s 53.5 but still showed activity expanding.

That helped China’s Shanghai benchmark surge 3.4 percent to 2,721.28.

Elsewhere, Australia’s index advanced 2 percent and Singapore’s market climbed 2.4 percent.

The region’s commodity stocks benefited from the sign of recovering demand from China as well as surging oil prices.

Japanese oil producer and explorer Inpex rose 1.6 percent, the world’s biggest miner BHP Billiton gained 3.1 percent in Sydney, and Chinese offshore oil producer CNOOC vaulted 6.9 percent in Hong Kong.

On Friday in the U.S., the Dow Jones industrials gained 96.53, or 1.2 percent, to 8,500.33 and the broader S&P 500 index rose 12.31, or 1.4 percent, to 919.14.

Stock futures pointed to further gains Monday on Wall Street. Dow futures climbed 91, or 1.1 percent, to 8,579 and S&P futures added 11.7, or 1.3 percent, to 929.80.

In oil, crude prices extended recent gains to approach $68. Benchmark crude for July delivery was up $1.43 to $67.74 a barrel by midday in Singapore in electronic trading on the New York Mercantile Exchange.

In currencies, the dollar fell to 95.04 yen from 96.16 yen in late Asian trade Friday. The euro rose to $1.4187 from $1.4030.

6/1/2009 3:13 AM STEPHEN WRIGHT AP Business Writer BANGKOK