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GLOBAL MARKETS-Asian shares cautiously push higher
September 1, 2014 / 12:35 AM / 3 years ago

GLOBAL MARKETS-Asian shares cautiously push higher

* Euro touches 1-yr low ahead of this week's ECB meeting
    * Official China manufacturing data underscores cooling fears
    * U.S. markets closed for Labor Day holiday

    By Lisa Twaronite
    TOKYO, Sept 1 (Reuters) - Asian shares edged higher on Monday, with
investors wary of a deepening crisis in Ukraine and a downbeat China
manufacturing survey, while the euro touched a fresh one-year low ahead of this
week's European Central Bank meeting.    
    Ukrainian President Petro Poroshenko warned a "full-scale war" was imminent
if Russian troops continued to advance in support of pro-Moscow rebels, while
U.S. and European leaders threatened Moscow with further sanctions.
    
    But Friday's Wall Street cheer managed to offset the geopolitical concerns
and the China survey. U.S. shares climbed ahead of a three-day weekend for
Monday's U.S. Labor Day holiday. 
    "Naturally, developments between Russia and the Ukraine will be in the cross
sights. However, despite more concerning rhetoric that tensions are nearing a
point of no return, we haven't really seen a heavy bias towards defensive
trading strategies today,"  IG chief market strategist Chris Weston wrote in a
note to clients.
     Financial spreadbetters predicted flat openings in European markets, with
Britain's FTSE 100 expected to open between 4 points higher and 7 points
lower, and both Germany's DAX and France's CAC 40 seen opening
unchanged to 1 point higher.
    MSCI's broadest index of Asia-Pacific shares outside Japan 
shrugged off early losses and was up about 0.3 percent, moving back toward last
Thursday's six-and-a-half-year peak. 
    Japan's Nikkei stock average ended up about 0.3 percent, taking back
some of the ground lost in August, when it shed 1.3 percent.
    The gains came even after an official index of China's manufacturing sector
fell from a 27-month high to 51.1 in August, a government study showed on
Monday, slightly less than forecast and adding to signs of growing softness in
the Chinese economy. Still, it was the second-highest reading this year.
 
    The final HSBC/Markit Purchasing Managers' Index also dropped, slipping to
50.2 in August, roughly in line with a preliminary reading of 50.3 and only a
shade above the 50-point mark that demarcates an expansion in activity from
contraction. 
    "The economy still faces considerable downside risks to growth in the
second-half of the year, which warrants further policy easing," said Qu Hongbin,
an economist at HSBC.
    But Friday's gains on Wall Street underpinned markets. The S&P 500 index
 set a new closing high, ending the day above the 2,000 milestone for the
third time. For the month, the Dow Jones industrial average rose 3.2
percent, the S&P 500 added 3.8 percent, and the Nasdaq Composite gained
4.8 percent. 
    The dollar index edged up to 82.764 in Asian trade, not far from
Friday's 13-month high of 82.773. 
    "Driven by the real and anticipated divergence in economic performance and
trajectory of monetary policy, the long-anticipated U.S. dollar recovery has
begun," Marc Chandler, global head of currency strategy at Brown Brothers
Harriman in New York, said in a note to clients.  
    "As is evident in the positioning of the futures market, and confirmed by
anecdotal evidence, speculative participants have amassed a significant large
U.S. dollar position," Chandler said.  
    Speculators raised their bullish bets on the U.S. dollar for a second week
to their highest in more than two years, according to data from the Commodity
Futures Trading Commission released on Friday. The dollar's net long position
soared to $32.92 billion in the week ended Aug. 26. 
    The dollar rose slightly to 104.17 yen, moving back toward last
week's seven-month high of 104.49.
    
    INFLATION BELOW ECB 'DANGER ZONE'
    The euro, meanwhile, edged down about 0.1 percent to $1.3124 after
dropping as low as $1.3119 and reaching lows unseen since early September 2013,
ahead of the European Central Bank meeting on Thursday.
    Data on Friday showed inflation in the euro zone slowed to a fresh five-year
low of 0.3 percent in August,  well below the ECB's "danger zone" of 1.0
percent. 
    Some analysts, including those at Nomura, are even betting that the ECB will
cut all key interest rates by a further 10 basis points, setting a larger
negative deposit rate of minus 0.20 percent.
    A Reuters poll on Thursday before the euro zone inflation data put a
40-percent chance on the ECB conducting quantitative easing through the purchase
of sovereign bonds by March next year. 
    The Bank of Japan will also meet this week, but is expected to hold monetary
policy steady for now despite a spate of weak economic data last week.
  
    Japanese household spending fell more than expected, the jobless rate inched
up and factory output was weak in July, suggesting that April's sales tax hike
could drag down the economy longer than expected. 
    But data released early on Monday showed Japanese companies raised spending
on plant and equipment in the April-June period by 3.0 percent compared with the
same quarter last year, showing a moderate recovery in business investment. But
a quarter-on-quarter decline suggests revised data will likely confirm the
economy's deepest contraction since the March 2011 disaster. 
    "The Japanese economic recovery seems weaker than initially expected.
Consumption has fallen more than expected," said Hiroshi Ono, the head of equity
investment at Sumitomo Life Insurance.
    Britain, Canada and Australia will also hold monetary policy meetings this
week, starting with the Reserve Bank of Australia (RBA) on Tuesday.    
    The RBA is widely expected to keep its cash rate steady at 2.5 percent for
the 13th straight policy meeting. 
    In commodities trading, palladium climbed about 0.4 percent to
$903.25 an ounce, near a 13-1/2 year peak of $907 hit on Friday. Spot gold
 fell slightly to $1,287.39 an ounce, after posting a small weekly gain. 
    U.S. crude slipped about 0.2 percent to $95.81 a barrel after marking
a monthly loss in August.
     
      

 (Additional reporting by Koh Gui Qing in Beijing and Hideyuki Sano in Tokyo;
Editing by Eric Meijer and Simon Cameron-Moore)

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