China surprises with manufacturing burst

BANGKOK, Thailand—A surprise uptick in China’s manufacturing output helped lift some stock markets out of the doldrums Thursday.

Stocks in Europe rose after a private manufacturing survey showed an unexpected growth spurt in Chinese factory output.

HSBC Corp. said the preliminary version of its monthly purchasing managers’ index for August rose to 50.1 from July’s 47.7. Numbers above 50 indicate an expansion in activity.

“The upshot is that China’s summer turnaround looks real. In turn, this implies that there is little need for further stimulus measures to shore up the economy,” said Capital Economics in a commentary.

“The government’s focus now should return to reining in overcapacity and credit.”

Hong Kong’s Hang Seng index gained following the Chinese manufacturing report. The benchmark advanced 0.4 per cent to 21,895.40, erasing the day’s earlier losses.

But elsewhere in Asia, stocks sank as investors reacted to the Federal Reserve’s disclosure that its top officials were leaning toward phasing out the Fed’s massive stimulus program.

The Fed released minutes of its July policy meeting Wednesday that showed most members want to slow down the pace of a massive bond-buying program. The U.S. central bank has been purchasing $85 billion of financial assets a month, which was intended to push down interest rates and spur borrowing and growth.

However, U.S. economic data in recent months has been strong enough to stir some Fed officials to call for a winding down of the asset purchases. That has sparked a sell-off in stock markets, which had been pumped up by the low interest rate policy, with some weaker Asian economies such as India and Indonesia particularly hard hit.

Critics have said the program has raised the risk of igniting inflation by pumping up the money supply and also could create bubbles in assets such as stocks.

The Fed minutes didn’t indicate when the “tapering” of purchases might begin, leaving analysts to guess.

“Most analysts still expect tapering to start in September, or at the bare minimum a September announcement and implementation through October and November,” said Stan Shamu, market strategist of IG in Melbourne, Australia.