Investing.com – Asian stocks were up on Monday morning with China releasing data indicating that its economy moved from contraction into expansion in May.
China’s National Bureau of Statics reported an official manufacturing Purchasing Manager’s Index of 50.6 on Sunday, above the 50-level indicating an expansion.
The Caixin/Markit manufacturing PMI for May corroborated the expansion, with a reading of 50.7.
Meanwhile, Hong Kong’s Hang Seng jumped 3.38%, even as investors digested U.S. Donald Trump’s response on Friday to China’s approval of national security laws for the city the day before.
Trump did not provide specific measures in the response, and some investors remained hopeful that the tensions between the two countries would have minimal impact.
“The impact is likely to be limited and more symbolic while the financial sector is unlikely to be affected. We are not too surprised by the move and don’t expect the Hong Kong financial markets to be either,” Sean Darby, Jefferies (NYSE:JEF) global equity strategist, said in a research note.
But other investors were concerned that the rising tensions could have larger and more adverse consequences.
“Admittedly, Trump’s presser on action against China for implementing the Hong Kong Security Bill, which the White House has alleged strips Hong Kong of any autonomy, proved to be more bark than bite. With specific and verifiable measures against China appearing to be weak, markets may draw hollow consolation that the U.S. is treading carefully; especially given risks of unintended economic consequences of far more damage being caused to Hong Kong and non-negligible harm to US economic interests,” Vishnu Varathan, Miuzho Bank’s head of economics and strategy, said in a note.
The ASX 200 rose a modest 0.93%. Reserve Bank of Australia Governor Philip Lowe is expected to announce that both the cash rate and three-year bond yield target will remain unchanged at 0.25% on Tuesday, with investors also looking to economic data to be released a day later to show whether the country is on the way to recovery from the economic impacts of COVID-19.