Asia stocks reverse losses on China's solid purchasing managers' indexes

Investors remain cautious after North Korea conducted missile test

Pedestrians walk past the Tokyo Stock Exchange, operated by Japan Exchange Group. Japan's Nikkei index fell 0.1 per cent on Monday. Tomohiro Ohsumi/Bloomberg
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Asian shares turned positive after solid Chinese data on Monday following a lacklustre start, while the dollar edged up but remained capped by US political uncertainty.

MSCI's broadest index of Asia-Pacific shares outside Japan reversed early losses to rise 0.1 per cent.

Chinese shares rose, with the blue-chip index up 0.15 per cent and the Shanghai Composite up 0.2 per cent. Hong Kong's Hang Seng rose 0.6 per cent.

The official Chinese manufacturing and services purchasing managers' indices both slipped in July, but remained above the 50-point mark that separates growth from contraction on a monthly basis.

Investors remained wary after North Korea conducted another missile test late on Friday that it said proved its ability to strike the US mainland. The US responded by flying two bombers over the Korean peninsula on Sunday.

"The geopolitical overhang will likely keep top side moves in check early in the week as the disorganised US and China policy towards North Korea is not helping matters," Stephen Innes, head of Asia-Pacific trading at OANDA, wrote in a note.

The Korean won was up 0.1 per cent on Monday at 1,122.2 won to the dollar, after sliding almost 0.7 per cent on Friday. South Korea's KOSPI fell 0.3 per cent.

Australian shares advanced 0.3 per cent.

The perceived safe-haven Japanese yen strengthened, with the dollar shedding 0.2 per cent to 110.48 yen, touching its weakest levels since mid-June.

Japan's Nikkei fell 0.1 per cent, with the firm yen offsetting news the country's industrial output rebounded in June from a decline in May.

On Wall Street on Friday, the S&P and Nasdaq indexes fell after earnings from companies including Amazon, Exxon Mobil and Starbucks disappointed.

But the Dow closed higher and set an intraday record, lifted by Chevron's strong earnings.

US corporate results overall have come in better than expected for the second quarter. More than halfway through reporting season, S&P 500 companies are on track to have increased earnings by 10.8 per cent, according to Thomson Reuters.

The dollar index, which tracks the greenback against a basket of six major peers, edged up 0.1 per cent to 93.376, after Friday's 0.6 per cent decline.

Markets are awaiting speeches by Cleveland Federal Reserve President Loretta Mester and San Francisco Fed President John Williams on Tuesday for further insight into whether the central bank has turned more dovish in light of recently muted inflation.

Investors will also be keeping a close eye on data including eurozone core inflation for July on Monday; the Reserve Bank of Australia's rate decision, at which it is expected to stay on hold, and US manufacturing conditions, due Tuesday; the Reserve Bank of India's meeting on Wednesday, at which it is expected to cut rates; and Bank of England on Thursday, where it is likely to leave rates unchanged.

A raft of private manufacturing surveys will also be released on Tuesday.

"It's a huge week on the data front, but for USD bulls there's an unpalatable reality that with (European Central Bank) members sounding increasingly hawkish and their (Fed) counterparts ever so dovish. Anything to confirm this bias will be pounced on by traders," Innes wrote.

The euro was steady at US$1.1741, following Friday's 0.6 per cent gain.