Asia shares rise after positive US manufacturing data

HONG KONG (AFP) - Asian markets rose Tuesday, taking their cue from another

record close on Wall Street following improved manufacturing data in the United States and China.

The dollar held firm as the yen traded near a one-month low while the euro continued to face pressure ahead of Thursday's European Central Bank meeting amid eurozone deflation concerns.

Tokyo added 0.85 per cent in early trade, a day after the Nikkei soared 2.07 per cent to close at a two-month high. Hong Kong added 0.90 per cent, Shanghai was up 0.38 per cent, while trade in Seoul was flat and Sydney dropped 0.25 per cent.

Markets have taken heart from improved manufacturing output in the world's two largest economies.

Figures released by China over the weekend showed manufacturing activity strengthening to a five-month high in May, an optimistic sign amid slumping growth and concerns over the knock-on effect any slowdown in the crucial trading hub could have on the global economy.

The official purchasing managers index (PMI) reached 50.8 in May, the National Bureau of Statistics said in a statement, up from 50.4 in March.

In the United States, meanwhile, the Institute of Supply Management said Monday its purchasing managers index of US manufacturing activity rose in May to 55.4 from 54.9 in April, rather than slowing to 53.2 as it first reported.

A reading above 50 indicates growth.

The figures, which were corrected after a software error, gave an unexpected mid-session lift to the US stock market with the Dow Jones Industrial Average advancing 0.16, or 26.46 points to 16,743.63 while the S&P 500 added 0.7 per cent, or 1.40 points, to end at 1,924.97.

Both indices notched closing records for the third straight session.

Traders are keeping a close eye on Europe with investors fretting ahead of the European Central Bank's meeting this week.

Inflation in Germany, Europe's biggest economy, slowed to its lowest rate in four years in May, at 0.9 per cent, compared with 1.3 per cent in April, according to preliminary government data.

The sharp fall added to pressure on the European Central Bank, which holds a monetary policy meeting Thursday, to act to keep the 18-nation bloc from falling into deflation, analysts said.

ECB watchers predicted a cut in the central bank's key interest rates and possibly new measures to pump liquidity into the banking system.

In foreign exchange trade the greenback was at 102.41 yen early Tuesday, up from 102.36 yen in New York Monday afternoon and 102.02 yen in Tokyo earlier Monday.

A weak yen is positive for Japanese exporters as it makes them more competitive abroad and increases profits when repatriated.

The euro was under pressure buying US$1.3596 and 139.25 yen on Tuesday against US$1.3595 and 139.19 yen in US trade.

Oil prices inched higher. The US benchmark, West Texas Intermediate for delivery in July, gained two cents to US$102.49 a barrel while Brent North Sea crude for July was up six cents at US$108.89 a barrel in early Asian trading.

Gold fetched US$1,243.64 an ounce at 0200 GMT compared to US$1,244.75 late Monday in Europe.