Asian markets cagey after China data, eye on US jobs

Hong Kong - Asian markets swung on Thursday morning after a surprise pick-up in Chinese factory activity that indicated stability in the world's number two economy but fuelled fears authorities will hold off fresh stimulus.

Trading was cagey across the region following oil-linked losses in New York and ahead of Friday's closely watched US jobs report that could precipitate another Federal Reserve interest rate hike.

Beijing said its purchasing managers index of manufacturing activity hit 50.4 last month, its highest level since October 2014 and suggesting the economy is stabilising following a series of policy tweaks aimed at kick-starting growth.

The reading was sharply up from July's 49.9 and confounded expectations for a drop to 49.8 in a survey for Bloomberg News. Anything above 50 marks growth and a figure below points to contraction.

Analysts said recent weak PMI data had been skewed by severe floods in China that had hit key manufacturing areas.

"Underlying demand continues to stabilise, suggesting that the expansionary fiscal policy stance adopted since early this year is still supporting growth," Julia Wang, an economist with HSBC in Hong Kong, told Bloomberg News.

China's economy is growing at its slowest rate for a quarter of a century.

But Zhu Qibing, chief macro economy analyst at BOCI International (China) in Beijing said the "People's Bank of China will refrain from more easing, but won't tighten immediately".

Oil up after sell-off

In early trade, Hong Kong was up 0.2% but Shanghai eased 0.2% with both markets seeing early volatility.

Tokyo rose 0.1% by the break, with a weaker yen keeping the Nikkei just above water. But Sydney fell 0.3% and Seoul was off 0.4% while Wellington, Taipei and Manila also sank.

The yen has softened against the dollar this week after Fed boss Janet Yellen - and later her vice chair Stanley Fischer - indicated rates could rise this year as the US economy improves.

The dollar bought ¥103.23 in Asia on Thursday, down from ¥103.43 in New York but well up from the levels below 100 yen seen last week before Yellen's speech.

Focus is now on Friday's non-farm payrolls figures, which will be pored over for clues about the Fed's next move. A private report by payrolls firm ADP said US businesses added a solid 177 000 new staff in July.

Analysts said that data supports the consensus forecast for a solid gain on Friday.

On oil markets, both main contracts edged up slightly a day after plunging in response to an unexpected jump in US crude inventories.

West Texas Intermediate edged up 0.5% to $44.92, having dived 3.6% on Wednesday, while Brent also added 0.5% to $47.11 after a 2.7% fall.