Tokyo - Asian shares rose on Monday after US Federal Reserve Chairperson Ben Bernanke kept the door open for further stimulus if needed, while weak economic indicators across the region raised hopes for additional growth-bolstering steps in Asia as well.
Bernanke stopped short of clearly signalling an imminent move last week, prompting investors to turn to reports from China to Australia that highlighted how the eurozone's debt crisis has eroded growth and threatened further slowdowns.
European equities were expected to drop, with financial spreadbetters calling London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX to open down as much as 0.2%. US stock futures were down 0.1%, but main US markets will be closed on Monday for the Labour Day holiday.
MSCI's broadest index of Asia-Pacific shares outside Japan added 0.5%, reversing from an earlier 0.5% fall to a fresh four-week low.
Australian shares turned positive to trade up 0.2% after an unexpected fall in July domestic retail sales strengthened the case for a rate cut later this year.
"China data definitely came out weaker over the weekend and when it's weaker everyone starts talking about easing. I wouldn't be surprised if we get some comments on measures that China would be looking to take to lift growth," said Stan Shamu, market analyst at IG Market.
Japan's Nikkei stock average rose 0.5%, recouping earlier losses which took it to a four-week low.
The HSBC China Purchasing Managers' Index for smaller and privately-owned producers fell to a seasonally adjusted 47.6, its lowest level since March 2009.
The HSBC report followed the official factory PMI on Saturday which dropped below 50 for the first time since November 2011, the latest signal that the world's second-biggest economy is struggling against global headwinds, which may pave the way for more government stimulus measures.
The Australian dollar, highly sensitive to China, Australia's single largest export market, fell to its lowest since July 25 of $1.0240 before rebounding to $1.0268. The Aussie also hit a nine-week low against the euro.
"Obviously, the Aussie is taking the brunt of China's dismal economic data, especially as the currency had consistently outperformed other markets over the past few months despite volatile risk sentiment. It was due for a correction." said Daisuke Karakama, market economist for Mizuho Corporate Bank.
Other data on Monday showed Taiwan's PMI fell in August for its steepest manufacturing contraction this year, hit by a drop in new export orders. Sluggish sales to China and Europe also hit South Korean exports for the first 20 days of August.
Bernanke supports sentiment
At the annual Jackson Hole, Wyoming, symposium, Bernanke on Friday expressed "grave concern" for the stagnating U.S. job market and said the Fed was prepared to take further steps to strengthen the economy if necessary. Bernanke said the Fed's asset purchases, known as quantitative easing, had been effective at boosting growth and fostering job creation.
His comments heighten market focus on the US ISM manufacturing data on Tuesday and the monthly jobs report on September 7 which will shed light to the timing and scale of the Fed's next easing policy ahead of its September 12-13 meeting.
"It is inevitable we will see another round of economic stimulus in September," said Jeff Sica, chief investment officer of Sica Wealth Management.
But he cautioned that markets may decline after the Fed's meeting given high expectations for a bold step already reflected in the recent performance of the Standard & Poor's 500 index, which hit a four-year high last month.
"The Fed cannot use a massive quantitative easing program since food and energy prices will ultimately accelerate creating massive inflation," he said.
Bernanke's comments drove US Treasuries yields to their lowest in three weeks and sent the dollar to an eight-week low against the euro of $1.2638. The euro was up 0.2% to $1.2581 on Monday.
"Throw in the China slowdown and the Europe situation, then Fed policy will continue to gently nudge the dollar a bit weaker in order to support the euro," said Richard Hastings, macro strategist at Global Hunter Securities.
The dollar eased 0.1% against the yen to ¥78.26 just off a three-week low of ¥78.187 hit on Friday.
The dollar ended August marginally up against the yen, defying the jinx that has usually seen the yen firm against the dollar in the month.
The European Central Bank's policy meeting on Thursday takes the spotlight, with markets expecting the bank to outline, and possibly offer some details of its bond-buying scheme aimed at driving down borrowing costs of highly-indebted Spain and Italy.
Karakama at Mizuho said the ECB was most likely to just outline conditions attached to its bond buying scheme.
Asian credit markets were subdued, with the spread on the iTraxx Asia ex-Japan investment-grade index flat.
Oil eased, with both US crude and Brent down 0.1% at $96.35 a barrel and $114.46, respectively.
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