Tokyo - Asian shares extended gains on Tuesday after a gauge of Chinese factory activity suggested signs of stabilisation, and Greece's latest budget proposals raised hopes it would stave off a debt default and reach a deal with lenders later this week.
The HSBC/Markit Flash China Manufacturing Purchasing Managers' Index (PMI) edged up to 49.6, a three-month high, from 49.2. But it remained below the 50 mark which separates contraction from expansion and still implied that Beijing might need to muster more stimulus measures.
“On one hand, the sector shows signs of improvement as output stabilised amid a slight pick up in total new work, while purchasing activity also rose slightly over the month,” said Annabel Fiddes, an economist at Markit.
“On the other hand, manufacturers continued to cut staff. This suggests companies have relatively muted growth expectations,” she said.
MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.7 percent. Chinese stocks gained after the PMI report as markets resumed trading following a public holiday on Monday, with the CSI300 index of the largest listed companies in Shanghai and Shenzhen rising 0.7 percent and the Shanghai Composite Index adding 0.2 percent. Both had plunged more than 13 percent last week.
Japan's Nikkei share average jumped 1.5 percent to a fresh 15-year high as investors bought back some of the shares they unloaded over three losing weeks.
“The fact that it appears that something will happen for Greece is really lifting the market's mood,” said Ayako Sera, senior market economist at Sumitomo Mitsui Trust Bank in Tokyo.
“But these moves up are not based on fundamentals. The upside is likely to be heavy, as concerns about global growth remain,” she said.
US stock futures rose about 0.2 percent after Wall Street posted solid gains on Monday, with the Nasdaq Composite closing at a record high.
European Council President Donald Tusk called the Greek proposals “a positive step forward”, and said the aim was to have Eurogroup finance ministers approve a cash-for-reform package on Wednesday evening, and put it to euro zone leaders for final endorsement on Thursday morning.
Stocks gained even as upbeat US data backed the view that the US Federal Reserve is on track to raise interest rates as early as September.
The National Association of Realtors said existing home sales rose to their highest in five-and-a-half years, increasing 5.1 percent to an annual rate of 5.35 million units, and adding to evidence that US economic momentum picked up in the second quarter after a sluggish start to the year.
The dollar rose about 0.2 percent on the day against the yen to 123.61, though it remained well below a 13-year high of 125.86 yen hit earlier this month.
The euro slipped 0.2 percent to $1.1313, moving away from a one-month high of $1.1440 hit on Thursday as some cautioned that steps in a positive direction did not guarantee an eventual solution to Greece's debt crisis.
“Although momentum appears to have turned positive, if there is no progress on negotiations for a programme extension before the 30 June deadline, the ECB may have to increase haircuts on Greek assets, which could, in turn, precipitate the need for capital controls,” strategists at Barclays said.
Yields on US Treasuries in line with less demand for safe-haven fixed income assets, and expectations of higher US interest rates this year also weighed on US debt prices. The benchmark US 10-year note yield was last at 2.38 percent, up from its US close of 2.36 percent.
In commodities trading, US crude futures slipped about 0.3 percent to $60.21 a barrel on renewed concerns of a global oil glut, although a forecast for a drop in US domestic crude stocks put a floor under prices. Brent crude was down 0.2 percent at $63.24.
Reuters