TOKYO, Dec 1: Asian shares were solidly higher on Tuesday, as investors latched on to tentative signs of stabilisation in China even as twin factory surveys highlighted the fragile state of the world's second-largest economy.
Financial spreadbetters predicted the buoyant mood to carry over to European trading, with Britain's FTSE 100 .FTSE seen opening as much as 0.5 per cent higher, Germany's DAX .GDAXI 0.4 per cent, and France's CAC 40 .FCHI 0.5 per cent.
"European indices are set to start December on a positive note," Farbod Mimeh, a junior dealer at Capital Spreads in London, said in a note to clients.
"Asian shares climbed higher after the release of mixed Chinese PMI data hinting that government support measures may finally have served their purpose as the economy shows signs of levelling out," Mimeh said.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS extended early gains and was up 1.8 per cent, while Japan's Nikkei .N225 ended up 1.3 per cent, closing above the 20,000 level for the first time since August.
Wall Street lost ground overnight, though major U.S. indexes still gained for the second straight month and U.S. stock futures ESc1 added 0.6 per cent in late Asian trade.
China's official Purchasing Managers' Index (PMI) stood at a three-year low of 49.6 in November, compared with the previous month's reading of 49.8 and below both forecasts for a reading of 49.8 as well as the 50-point mark that separates growth from contraction.
But the private Caixin/Markit China Manufacturing PMI showed factory activity contracted at a slower pace than in October, fuelling hopes the economy may be slowly levelling out in response to a series of government support measures.
"This indicates that pressure on economic growth has eased and fiscal policy has had a strong effect," said He Fan, chief economist at Caixin Insight Group. "Overall, the economy is still on track to become more stable."
China's major stock indexes erased losses after spending much of the day in negative territory. The CSI300 index .CSI300 was 0.6 per cent higher and the Shanghai Composite Index .SSEC rose 0.1 per cent.
China's yuan was flat in onshore trading CNY=CFXS, after the International Monetary Fund on Monday admitted the yuan into its Special Drawing Rights (SDR) basket alongside the dollar, euro, pound sterling and yen.
The widely expected move was a milestone in China's integration into global finances and a nod of approval to the country's reforms.
"What is interesting about the new weightings is that the biggest change is for the euro, which now accounts for 30.9 per cent of the basket instead of 37.4 per cent. While EUR/USD did not have much of a reaction to the news, it is certainly not positive for the currency," Kathy Lien, managing director of FX strategy for BK Asset Management, said in a note to clients.