Asian Shares Mostly Higher But All Eyes On How China Fares

SINGAPORE -- Asian shares were mostly a little higher Tuesday, though there was much caution after a slip on Wall Street and with all eyes on how China's market would fare. Shipping and steel stocks were early decliners in Tokyo.

Japan's Nikkei 225 was up 0.2% while South Korea's Kospi nudged up 0.4% and Australia's S&P/ASX 200 added 0.3%. New Zealand's NZX-50 though was 1.0% lower. Dow Jones Industrial Average futures were recently 13 points higher in screen trade.

Market players were waiting to see how China's share market fared, after the Shanghai Composite Index slumped 6.7% Monday amid concerns about share supply and a slowdown in lending growth. They were also awaiting the release later Tuesday of CLSA's Purchasing Managers Index for China.

"China will be the biggest concern today," said Mizuho Securities market analyst Yukio Takahashi. "Should the PMI be horrible, we could have a breakdown in equities and risk (appetite)," added Westpac Bank markets strategist Imre Speizer.

There was already one reading out Tuesday morning on China PMI for August, with the China Federation of Logistics & Purchasing's index hitting 54.0, from 53.3 in July, offering some comfort on the economic outlook.

Shipping and steel stocks were lower in Tokyo, with Mitsui O.S.K. Lines down 2.0% and JFE Holdings 1.9%.

Technology stocks were higher in Korea after recent encouraging results from U.S. technology companies, with Samsung Electronics up 0.4% and Samsung Electro-Mechanics up 1.1%.

In Australia, ANZ was up 0.8% as brokers upgraded their target prices for the stock, though materials and energy stocks were mostly lower on falling commodity prices, with BHP down 0.4% and Woodside Petroleum 1.5% lower.

Investors were awaiting the outcome of the Reserve Bank of Australia's policy meeting Tuesday, with most expecting no change in interest rates.

Shares in New Zealand were lower with Telecom off 1.8% and Contact Energy down 1.0%. PGG Wrightson fell another 2.9%, amid concerns it may raise fresh capital.

Foreign exchange markets were trading quietly, looking to equity markets and China's data for leads, with the U.S. dollar at Y93.10, from Y92.98 in New York, while the euro was at Y133.46, from Y133.25 and $1.43315, from $1.4333.

Tsuyoshi Okada, managing director at Gaitame.com Research Institute, said after Japan's weekend election led to "some yen-buying on optimism over the change in leadership," the focus was back squarely on overseas data.

Japan government bonds were tracking gains in U.S. Treasurys, with the lead September futures at 139.17 points, up 0.04. The 10-year yield was flat at 1.300%.

Base metals were pressured by Monday's weakness in share markets, particularly in China, with LME metals resuming trade after a holiday Monday in the U.K. LME three-month copper was down 2.8% at $6,290 per ton from the London kerb on Friday.

"We saw a drop across the board in a lot of the metals, and a lot of it was the equities," said Daniel Pavilonis, Lind-Waldock senior market strategist.

Westpac senior commodity analyst Justin Smirk said the Shanghai Composite index was a proxy for risk appetite more broadly in commodity markets. "When the Shanghai Composite wobbles, it hits commodities after prices have run up so high so quickly. It's fairly clear that the long-term story is very much intact, but not so for the short term."

Spot gold was up $1.60 at $952.50 per troy ounce from New York, while Nymex October crude oil futures were down 17 cents at $69.79 per barrel on Globex.