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Tokyo - Asian shares rose and the dollar recovered against the yen on Wednesday after strong US factory activity data raised hopes that the world's biggest economy remained on a recovery track while growth in Asian manufacturing improved broader sentiment.
European shares were expected to open mixed, with most exchanges reopening after the May Day holiday on Tuesday. Financial spreadbetters predicted that major European markets
would open between down 0.3% and up 0.7%. US stock futures were up 0.2%.
MSCI's broadest index of Asia-Pacific shares outside Japan climbed 0.9% to a six-week high, after the Dow Jones Industrial Average closed on Tuesday at its highest level in more than four years.
Japan's Nikkei stock average, which fell to a two-and-a-half month closing low on Tuesday, gained 0.7%. Japanese markets will be closed for holidays on Thursday and Friday.
"The effect of the solid US manufacturing activity will be felt in Asia in about six months, supporting my view that Asian exporters will gradually recover towards the end of the year," said Hirokazu Yuihama, a senior strategist at Daiwa Securities in Tokyo.
"Export data from Asia for April and May will be a focus in gauging the strength of Asia's economies and thus investors' risk appetite."
Factory order data released on Wednesday showed manufacturing grew in key exporters Taiwan and South Korea in April but at a slower pace. Growth in India's factory sector also inched up in April.
The HSBC China Purchasing Managers' Index, geared to smaller firms, improved to 49.3 in April from 48.3 in March, showing that the rate of deterioration had slowed following a difficult first quarter.
"The economic data is supporting oil prices, but there will be anxiety ahead of the US jobs report on Friday, so I don't expect any big volatility for the rest of the week," said Gordon Kwan, head of energy research at Mirae Asset Management in Hong Kong.
US ISM improves
The Institute for Supply Management's index rose to 54.8 in April from 53.4 in March, the strongest rate in 10 months, easing worries the US economy had lost momentum at the start of the second quarter.
The ISM data "points to a mild acceleration in activity in the US manufacturing sector", said ANZ senior economist Amber Rabinov.
ISM's gauge of employment also rose to its highest level since last June, coming ahead of Washington's nonfarm payrolls report due on Friday, which is forecast to show the economy added 170 000 jobs in April.
Factory activity and jobs data are key to gauging the Federal Reserve's course for monetary policy as the US central bank is seen leaving the door open for further easing if labour and other economic conditions worsen seriously.
"After the surprisingly strong ISM number, the next job data will be more important than usual. If it is strong, it could cement expectation of strong recovery at least in the United States," said Mitsuru Saito, chief economist at Tokai Tokyo Securities.
The dollar rebounded on reduced speculation about the Fed taking on a third round of bond buying to bolster the economy, as the Japanese central bank just last week took more steps to reinforce its already accommodative stance.
The dollar rose 0.3% to ¥80.32, after touching a two-and-a-half month low on Tuesday.
Asian credit markets were subdued, with the spread on the iTraxx Asia ex-Japan investment-grade index little changed.
Busy week
Investors were unlikely to take big risk positions ahead of a European Central Bank meeting on Thursday, Friday's US jobs data and weekend elections in Greece and France.
The ECB is expected to keep interest rates unchanged, but markets will be focusing on whether the bank may be open to taking more steps to resolve the eurozone's debt crisis, as well as its view on the bloc's economy after Spain fell into recession in the first quarter.
In Greece and France, voters are expected to punish leaders for austerity, after workers across southern Europe protested against spending cuts at May Day rallies.
Oil eased, with US crude futures down 0.3% at $105.88 a barrel after settling up 1.23% at its highest settlement since March 27 on improved demand outlook from the ISM data. Brent fell 0.2% at $119.46 a barrel.
China reforms
In the latest of a series of market reforms, the China Securities Regulatory Commission said on Monday it would reduce transactions fees for trades on the Shanghai and Shenzhen stock exchanges.
The news helped lift Shanghai shares 1.8% as they resumed trading on Wednesday after a two-day holiday.
China has been slowing taking measures to liberalise its financial markets, with pressures particularly strong on its currency market.
On Wednesday, China fixed the yuan's mid-point versus the dollar at 6.2670, the highest fixing since the landmark revaluation in 2005. The dollar/yuan exchange rate may rise or fall 1% from the mid-point each day.
