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Japan shares lead Asian gains as yen slips on strong US data

SEOUL, South Korea – The Nikkei led gains in Asian stock markets Tuesday as the dollar rose against the yen following upbeat U.S. manufacturing data.

KEEPING SCORE: Tokyo’s Nikkei 225 rose 0.8 per cent to 16,735.65 as the weaker yen boosted shares of the country’s big export manufacturers. South Korea’s Kospi added 0.5 per cent to 2,053.93 and Hong Kong’s Hang Seng index inched up 0.1 per cent to 23,617.20. Australia’s S&P/ASX 200 edged 0.1 per cent higher to 5,484.00. Benchmarks in India, Taiwan and Southeast Asia were higher. China’s Shanghai Composite Index was closed for a holiday.

FACTORY GAUGE: A monthly U.S. manufacturing index rebounded, sending the dollar higher as investor expectations rose that Fed policymakers will hike interest rates again as the economy strengthens. The Institute for Supply Management said its manufacturing index showed activity expanded in September after shrinking in August, with new orders and factory production rising as employment fell.

ANALYST’S TAKE: “Solid manufacturing PMIs suggested expansion in September and bolstered the case for the rate hike,” Alex Furber, senior client services executive at CMC Markets in Singapore, said in a daily note referring to the U.S. Purchasing Managers’ Index. “In the short term, this may see the equity market cool somewhat as investors pull out of risk assets as the Fed is seen to be normalizing.”

JAPAN PRICES: Companies cut their outlook for inflation to 0.6 per cent over the next year, the fifth reduction in a row, the Bank of Japan’s quarterly Tankan business sentiment survey showed, according to Kyodo News. The result suggests that the central bank might have to roll out more stimulus to achieve its 2 per cent inflation goal.

CENTRAL BANKING: Australia’s central bank said it was leaving its main benchmark rate unchanged at 1.5 per cent following a scheduled policy meeting. The decision was the first under new governor Philip Lowe, who cited lower than average global growth as a reason for staying on hold. Investors were also awaiting a rate decision by India’s central bank.

DATA WATCH: A number of economic reports are due out this week, culminating Friday with the U.S. government’s monthly jobs survey, which is also likely to weigh on Federal Reserve officials as they decide when to raise rates.

CURRENCIES: The dollar rose to 102.24 yen from 101.78 yen. The euro fell to $1.1188 from $1.1213.

WALL STREET: U.S. markets closed lower. The Dow Jones industrial average fell 0.3 per cent to 18,253.85. The S&P 500 index lost 0.3 per cent to 2,161.20. The Nasdaq composite declined 0.2 per cent to 5,300.87.

ENERGY: Benchmark U.S. crude oil fell 28 cents to $48.53 per barrel in electronic trading on the New York Mercantile Exchange. The contract closed 57 cents higher at $48.81 a barrel on Monday. Brent crude, the international standard, lost 19 cents at $50.70 a barrel in London.