* Stocks soft after S&P suffers biggest loss since April
* China PMI beats forecasts with rise to 51.7 in July
* US dollar well supported on speculation of early Fed rate
* Gold melts to a 6-week low, oil hits 4-month trough
By Wayne Cole
SYDNEY, Aug 1 Asian shares pared losses on
Friday as data showing a surprisingly strong pick up in Chinese
manufacturing helped take some of the sting out of a slump on
The official measure of industrial activity (PMI) rose to
51.7 in July from 51.0 in June, beating forecasts of 51.4 and
the highest in 27 months.
The recovery was also broad based with 10 out of the 13
sub-indicies pointing to improvement from the previous month.
The survey added to evidence that Beijing's stimulus efforts
were gaining traction in the world's second largest economy, and
followed news that growth in the United States had rebounded
from a winter lull.
That could not entirely offset the drag from Wall Street,
where the S&P 500 suffered its biggest daily loss since April.
MSCI's broadest index of Asia-Pacific shares outside Japan
was off 0.6 percent and Shanghai stocks eased
Yet Japan's Nikkei did recoup some of its early
losses to be down just 0.2 percent, while the broader Topix
dipped 0.4 percent.
And losses in the region were modest compared to the 1.88
percent drop in the Dow, or the S&P 500's 2
Some had blamed the swoon on data showing that U.S. labour
costs recorded their biggest gain in more than 5-1/2 years and
stoking speculation the Federal Reserve could raise interest
rates sooner than previously thought.
But, after an initial wobble, Fed funds futures <0#FF:> were
edging higher on Friday and paring back the probability of an
Likewise, yields on two-year Treasury paper had
dropped back to 54 basis points having been as high as 59 basis
points on Wednesday.
DOLLAR UP, OIL DOWN
Aiding bonds was an unexpected, and inexplicable, 10-point
plunge in the Chicago purchasing managers index to 52.6 in June.
That was the sharpest drop since late 2008 and sparked talk
the national survey of manufacturing, known as the ISM, might
surprise on the downside later on Friday.
Also due is the ever-influential U.S. payrolls report for
July. While analysts expect another healthy gain of 233,000, a
further drop in the jobless rate could add to investor jitters
over interest rates.
All the muttering about when the Fed might hike has been a
boon for the U.S. dollar in recent weeks. Measured against a
basket of its peers, the dollar gained 2 percent in July
for its best monthly performance in 1-1/2 years.
The dollar bought 102.86 yen on Friday, after peaking
at a four-month high of 103.15. The euro traded at $1.3388
, still uncomfortably close to the nine-month trough of
$1.3366 plumbed earlier in the week.
If investors really were worried about U.S. inflation it did
not show in the gold market, where the metal was down at
$1,283.09 after touching a six-week trough.
Oil prices also took a spill amid signs of plentiful supply,
which has potentially positive implications for global inflation
and economic growth.
U.S. crude oil fell to its lowest since March around $97.66
a barrel, while Brent was off 21 cents at
$105.81. Brent lost more than 6 percent in July, its biggest
monthly decline since April 2013.
(Editing by Eric Meijer & Shri Navaratnam)