The flash Markit/HSBC Purchasing Managers' Index (PMI) for China
fell to 49.6 in January, from December's 50.5, suggesting a mild
slowdown at the end of 2013 has continued into the new year.
"This implies softening growth momentum for manufacturing sectors,
which has already weighed on employment growth," said HSBC's chief
China economist Qu Hongbin.
"As inflation is not a concern, the policy focus should tilt towards
Shanghai shares slipped 0.4 percent <.SSEC>, though investors were
still relieved that the country's central bank was flooding money
markets with cash to ease a credit squeeze.
Worst hit was the Australian dollar which shed a third of a U.S.
cent to $0.8795 as speculators sold it as a liquid proxy for growth
in the Asian region.
MSCI's broadest index of Asia-Pacific shares outside Japan
<.MIAPJ0000PUS> also lost 0.9 percent, while Australia's main index
<.AXJO> dropped 0.5 percent.
Japan's Nikkei <.N225> pared its early gains to be up 0.2 percent on
the day. The news from Japan has been better, with a Reuters survey
of business sentiment improving for a third straight month in
January to reach a high last seen in 2010 as optimists far
Wall Street provided few leads with the Dow <.DJI> ending Wednesday
down 0.25 percent, while the S&P 500 <.SPX> added 0.06 percent and
the Nasdaq <.IXIC> 0.41 percent.
Later Thursday, Europe has its own version of early PMIs along with
a round of unemployment figures.
The Eurozone composite PMI is seen edging up to 52.4 in January,
from 52.1, led mostly by strength in Germany while France could
again lag behind.
RATE OUTLOOKS DIVERGE
In currencies, it was all about central bank expectations. Sterling
surged after a sharp fall in UK unemployment stoked speculation the
Bank of England would have to bring forward the day when it starts
hiking interest rates.
The euro duly fell to a one-year low against sterling of 81.81
pence, while the pound jumped over a cent on the U.S. dollar and
held firm Thursday at $1.6571.
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Across the pond, the Canadian dollar had tumbled to a more than
four-year low on Wednesday after the Bank of Canada said it was
growing more concerned about low inflation, leaving the door wide
open to a cut in interest rates.
The central bank also took a rhetorical razor to the Canadian dollar
saying a weaker currency would be positive for both exports and
The stark contrast with the situation in Britain, saw the pound soar
1.8 percent on the Canadian currency to the highest since mid-2009.
The U.S. dollar found some support from expectations that the
Federal Reserve will make another $10 billion cut to its monthly
bond-buying program at its policy meeting next week.
The dollar was modestly firmer on the yen at 104.54, while the euro
marked time at $1.3544.
In commodity markets, U.S. crude eased in Asian trade after an
industry report showed a sharp rise in crude stockpiles in the
world's biggest oil consumer the United States.
U.S. crude oil futures eased 30 cents to $96.43 a barrel early
Thursday after jumping more than a dollar overnight. Brent oil for
March delivery lost 32 cents to $107.95.
Gold lost ground after its repeated failure to break above key
technical resistance at $1,260 an ounce prompted investors to take
profits. Spot gold was off at $1,233.05 per ounce, leaving behind
Monday's peak of $1,259.85.
(Editing by Richard Pullin and Simon
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