Manufacturing data from Japan and China

A report on Monday from the Ministry of Economy, Trade and Industry showed that Japanese industrial production fell 0.7 in August.

However, the fall last month came after a 3.4 percent jump in July. A government survey accompanying the report also showed that production is expected to increase 5.2 percent in September and 2.5 percent in October.

In further indication that factory activity remains robust, another report on Monday showed that the Markit/JMMA Japan manufacturing PMI rose to 52.5 in September, the highest since February 2011, from 52.2 in August.

Another report on Monday showed that retail sales rose 1.1 percent in August from a year earlier.

Meanwhile, over in China, the final HSBC manufacturing PMI for September disappointed, coming in at 50.2. Although up from 50.1 in August and indicating expansion, it was well below last week's flash reading of 51.2.

US consumer spending rises, eurozone economic confidence improves

US economic data on Friday were mixed.

Consumer spending rose 0.3 percent in August, the fourth consecutive rise, while income rose 0.4 percent, the most in six months.

However, the Thomson Reuters/University of Michigan’s index of consumer sentiment fell to 77.5 in September, the lowest level in five months, from 82.1 in August.

In the euro area, the European Commission's economic sentiment indicator rose to 96.9 in September from 95.3 in August, its fifth consecutive increase.

Meanwhile, inflation remained subdued, with the rate in Germany staying unchanged at 1.6 percent in September.

Inflation in Japan, though, rose to the fastest pace in nearly five years in August. Consumer prices excluding fresh food rose 0.8 percent from a year earlier, mainly due to higher energy prices resulting from a weaker yen.

US and UK confirm second quarter growth

A report on Thursday confirmed that the US economy grew at a 2.5 percent annualised rate in the second quarter.

Less positively, there was also confirmation on Thursday that the recovery in the US housing market has lost momentum. Pending home sales fell 1.6 percent in August after having fallen 1.4 percent in July.

In the UK, a report on Thursday confirmed that the economy grew 0.7 percent in the second quarter, the fastest pace in three years.

Third quarter data have mostly also been positive. A report from the Confederation of British Industry on Wednesday showed that retail sales grew at the fastest annual pace since June 2012 while a report on Thursday showed that the GfK consumer confidence index rose three points to -10 in September, the highest since November 2007.

However, in a sign that the euro area's recovery remains fragile, a report from the European Central Bank on Thursday showed that loans to the private sector fell 2 percent in August from a year earlier. That was the 16th monthly decline and the biggest since the start of the single currency in 1999.

US new home sales and durable goods orders rebound weakly

US economic data on Wednesday were mixed.

New home sales rose 7.9 percent in August. This still left the annual sales rate at 421,000 after the 14.1 percent plunge in sales in July, and is less than the average 446,000 rate in the first six months of 2013.

Durable goods orders showed hardly any rebound in August, rising just 0.1 percent after having plunged 8.1 percent in July. Orders for non-defense capital goods excluding aircraft rose 1.5 percent after having fallen 3.3 percent in July.

Meanwhile, the risk of a government shutdown was made stark on Wednesday by US Treasury Secretary Jack Lew, who warned Congress that the government would exhaust its borrowing capacity no later than October 17.

US consumer confidence falls, Germany business confidence rises

Global economic data on Tuesday were mixed.

In the US, the Conference Board's consumer confidence index fell to 79.7 in September from 81.8 in August. However, the S&P/Case-Shiller index of home prices in 20 cities increased 12.4 percent in July from a year earlier, the biggest advance since February 2006.

There were also positive data on UK housing on Tuesday. The British Bankers' Association reported that mortgage approvals rose to 38,228 in August, up from 37,428 in July and the highest since December 2009.

German business confidence barely rose in September though. The Ifo institute’s business climate index edged up to 107.7 from 107.6 in August.

Purchasing managers surveys show growth in China, euro area and US

Economic data on Monday were mostly positive.

In China, HSBC's manufacturing PMI rose to 51.2 in September, a six-month high, from 50.1 in August.

In the euro area, Markit's composite PMI rose to 52.1 in September from 51.5. The increase was driven by a jump in the services index to 52.1 from 50.7 but the manufacturing PMI fell to 51.1 from 51.4.

Also slowing in September is US manufacturing, where Markit's PMI fell to 52.8 from 53.1 in August.

A report from the Chicago Federal Reserve on Monday did indicate some improvement in the economy though. Its national activity index rose to +0.14 in August from -0.43 in July.

The index’s three-month moving average also increased to -0.18 in August from -0.24 in July. However, this suggests that economic growth remained below its historical trend.

Hussman: S&P 500 to hit 1,800?

The Federal Reserve's decision last week not to slow its rate of bond purchases has forced the bearishly-oriented fund manager John Hussman to consider the possibility of a short-term surge in the stock market.

Last week, the Federal Open Market Committee surprised investors by deciding at its monetary policy meeting on Wednesday not to taper the Fed's rate of bond purchases. Chairman Ben Bernanke said at a press conference after the meeting that the tightening of financial conditions in recent months could slow economic growth even as conditions in the United States job market remain “far from what all of us would like to see”.

Stocks in the United States reacted positively to the decision. The Standard & Poor's 500 Index rose 1.2 percent on Wednesday to close at a record high of 1,725.52.

In his latest article entitled “Psychological Ether”, John Hussman says that with the Fed's decision last week, it is possible, although not necessarily his forecast, that “the conditions for a final wave of speculation may have been created” and that we could see “an advance above 1800 in the S&P 500 over a period of about 6 weeks”.

“Unfortunately, even though the equity market has been rising on what we view as nothing but noxious psychological ether, the FOMC has – perhaps unintentionally – released another tank of the stuff,” he writes.

For the longer term, however, Hussman remains pessimistic. He notes that profit margins are at an extreme level and that he expects corporate profits to contract at a rate of somewhere between 5-15 percent annually over the next 3 to 4 years.

According to Hussman, one driver of falling corporate profits is a fall in the government's fiscal deficit. According to him, increases in the combined deficit of the government and household sectors lead to increases in corporate profits and vice versa. The former deficit has been declining recently, which does not augur well for corporate profits.

Indeed, a report from the Congressional Budget Office on Tuesday showed that the budget deficit is likely to shrink this year to its smallest size since 2008. It is seen falling to about 4 percent of GDP, compared with a peak of almost 10 percent in 2009.

Furthermore, the deficit is forecast to continue shrinking over the next few years, falling to 2 percent of GDP by 2015 before gradually rising again thereafter.

So if the stock market does experience a surge in coming weeks, Hussman thinks that it could turn out to be just a “speculative blowoff” that “would only make the subsequent completion of the present market cycle that much worse”.

India raises interest rates, markets fall

While the Federal Reserve is showing hesitance in following through with its plan to reduce monetary stimulus, the Reserve Bank of India displayed no such reservation on Friday as it raised its benchmark interest rate to 7.50 percent from 7.25 percent.

Stock markets in Asia fell on Friday, with Indian stocks predictably hit hardest following the rate hike, falling 1.85 percent.

But investors around the world also lost some of the enthusiasm that they had exhibited following the Fed's decision on Wednesday not to start tapering its bond purchases. In the US, the S&P 500 fell 0.7 percent on Friday. The STOXX Europe 600 fell 0.3 percent.

European stocks fell despite a report from the European Commission on Friday showing that the consumer confidence index for the euro area rose to minus 14.9 in September, the highest level since July 2011, from minus 15.6 in August.

US leading economic index and Japanese exports rise

US economic data on Thursday were positive. The Conference Board's index of US leading indicators rose 0.7 percent in August, existing home sales rose 1.7 percent and the Federal Reserve Bank of Philadelphia’s general economic index jumped to 22.3 in September from 9.3 in August.

Japanese economic data on Thursday were also positive. The all-industry activity index rebounded 0.5 percent in July after having fallen 0.7 percent in June. Exports rose 14.7 percent in August from a year earlier, up from 12.2 percent in July, while imports rose 16.0 percent.

However, the run of strong economic data from the UK took a break on Thursday. Retail sales fell 0.9 percent in August, with food store sales falling 2.7 percent, fully reversing the previous month's gain.

US stocks at record highs after Fed pulls back from pulling back

US stocks hit record highs on Wednesday after the Federal Reserve surprised investors by refraining from tapering its bond purchases. The Dow Jones Industrial Average rose 0.95 percent to 15,676.94 and the S&P 500 rose 1.22 percent to 1,725.52.

“Conditions in the job market today are still far from what all of us would like to see,” Chairman Ben Bernanke said at a press conference after the Fed's monetary policy meeting on Wednesday. “The committee has concern that rapid tightening of financial conditions in recent months would have the effect of slowing growth.”

The latest Fed forecasts released on Wednesday showed that the US economy is now expected to grow between 2 percent and 2.3 percent this year, down from a June forecast of 2.3 percent to 2.6 percent.

Underlining the Fed's cautious stance, US housing data on Wednesday were mixed. Housing starts rose 0.9 percent in August but was weaker than expected. Indeed building permits fell 3.8 percent.

In contrast, China's housing market looks in need of further cooling. Average new home prices in China's 70 major cities rose 8.3 percent in August from a year earlier, the fastest rate in at least 2½ years, according to Reuters.

US homebuilder sentiment unchanged, inflation eases

US homebuilder sentiment was unchanged in September after four straight months of gains. The National Association of Home Builders reported on Tuesday that the NAHB/Wells Fargo Housing Market Index remained at 58 in September, unchanged from August.

Another report on Tuesday showed that US inflation eased in August. Consumer prices rose 0.1 percent last month, bringing the 12-month increase down to 1.5 percent from 2.0 percent in July.

In the UK, consumer prices rose 0.4 percent in August. That still left the annual inflation rate at 2.7 percent, down from 2.8 percent in July.

US manufacturing output up sharply, Treasury yields fall

A report from the Federal Reserve on Monday showed that US manufacturing production rebounded sharply in August, rising 0.7 percent after having fallen 0.4 percent in July.

Overall industrial production rose 0.4 percent in August after having been flat in the prior month.

A report from the Federal Reserve Bank of New York, however, showed that its general economic index eased to 6.3 in September from 8.2 last month.

Despite the growth in industrial production in August, US Treasury yields fell on Monday after Lawrence Summers withdrew his candidacy to become the next Federal Reserve chairman, leaving Fed Vice Chairman Janet Yellen as the leading candidate.

The 5-year yield fell seven basis points to 1.62 percent while the 10-year yield fell two basis points to 2.86 percent.

OECD sees most major economies improving

The Organisation for Economic Co-operation and Development reported last week that composite leading indicators point to improvements in growth in most major OECD countries while growth in China is returning to trend.

OECD composite leading indicators
	Ratio to trend, amplitude adjusted					Change from previous month
	2013					2013
	Mar	Apr	May	Jun	Jul	Mar	Apr	May	Jun	Jul
OECD area	100.3	100.4	100.5	100.6	100.7	0.10	0.10	0.09	0.09	0.08
United States	100.7	100.8	100.9	101.0	101.1	0.09	0.09	0.11	0.10	0.09
Euro area	99.9	100.0	100.2	100.3	100.5	0.15	0.14	0.16	0.17	0.17
Japan	100.7	100.9	101.0	101.1	101.1	0.23	0.20	0.15	0.08	0.03
China	99.8	99.7	99.5	99.5	99.4	-0.13	-0.15	-0.14	-0.09	-0.03

However, other economic data last week were not very positive.

In the United States, retail sales rose 0.2 percent in August, the smallest increase in four months, while the preliminary Thomson Reuters/University of Michigan’s index of consumer sentiment for September came in at 76.8, down from 82.1 in August.

In the euro area, industrial production fell 1.5 percent in July, the second decline in three months.

In Japan, core machinery orders were flat in July. The consumer confidence index fell to 43.0 in August from 43.6 in July, its third consecutive decline. The economy watchers survey's current conditions index fell for the fifth consecutive month in August to 51.2 from 52.3 in July while the future conditions index fell to 51.2 from 53.6.

However, data from China did corroborate the OECD's assessment of a return to trend growth. Industrial production rose 10.4 percent from a year earlier, the biggest increase in 17 months, while retail sales rose 13.4 percent, up from 13.2 percent in July.

US retail sales growth slows, consumer sentiment falls

Data on Friday indicate that US consumer demand has dipped recently.

Retail sales in the US rose 0.2 percent in August, the smallest increase in four months.

The preliminary Thomson Reuters/University of Michigan’s index of consumer sentiment for September fell to 76.8 from 82.1 in August.

Investor sentiment has picked up, though. The S&P 500 rose 0.3 percent on Friday to finish the week with a 2.0 percent increase, its best weekly gain in two months.

Indonesia raises interest rates again as largest emerging markets lose favour

Emerging economies have been hit by currency turmoil recently, and on Thursday, Indonesia's central bank felt compelled to raise interest rates for the second time in two weeks.

Bank Indonesia increased its benchmark rate by 25 basis points to 7.25 per cent, bringing the total increase since June to 150 basis points.

This comes even as it lowered its economic growth forecast for 2013 to between 5.5 and 5.9 per cent from 5.8 to 6.2 per cent.

However, another emerging economy that has been hit by the currency turmoil, India, did report a 2.6 percent year-on-year gain in industrial production for July on Thursday, snapping two months of contraction.

Still, a recent Bloomberg poll showed that the largest developing nations have some of the worst market opportunities, with India faring the poorest.

Not that developed economies had particularly positive data to report on Thursday.

Japan's core machinery orders were flat in July after having fallen 2.7 percent in June.

Industrial production in the euro area fell 1.5 percent in July, more than reversing the 0.6 percent increase in June.

UK jobless rate dips as economy enjoys “sugar rush”

A report on Wednesday showed that Britian's unemployment rate fell to 7.7 percent in the three months ending July, the lowest since the September-November 2012 period. The number of people claiming jobless benefit fell by 32,600 in August after having fallen by 36,300 in July, the steepest decline since June 1997.

The latest data add to other recent reports of strength in the UK economy. From Reuters:

Hailed on Monday as a “turning point” by Chancellor George Osborne, economic indicators out of the UK have surpassed even the most hopeful analysts' expectations over the last two months.

Surveys showed business activity in Britain rose last month at a pace unmatched by any of its major G20 peers, a huge contrast to the early part of the year when there was widespread talk of a “triple dip” recession...

“I think we are quite heavily reliant on a hair-of-the-dog prescription for the UK economy, and there's more debt-fuelled consumption,” said Philip Rush, UK economist at Nomura...

“I think we have entered a new upward trend for the UK economy, and in that respect what we have is sustainable for at least a few years,” said Rush.

Not everyone thinks this can be sustained though.

“We're enjoying a sugar rush at the moment,” said Alan Clarke, director of fixed income strategy at Scotiabank in London, citing pent-up demand in the housing market and government stimulus to improve access to it.

“I don't think that continues forever. We won't be seeing people increasing their spending in excess of their disposable incomes next year, which is what they're doing right now. So we're on borrowed time on that front,” he said.

Chinese economy accelerates as credit growth rebounds

China's economy accelerated in August, based on data released on Tuesday.

Industrial production rose 10.4 percent from a year earlier, up from 9.7 percent in July and, indeed, the biggest increase in 17 months.

Retail sales rose 13.4 percent, up from 13.2 percent in July.

Fixed-asset investment increased 20.3 percent in the first eight months of the year compared with the previous year, up from the 20.1 percent increase for the first seven months.

With an accelerating economy comes increased credit growth. Chinese banks extended 711.3 billion yuan in new loans in August, more than the 699.9 billion yuan in July.

Total social financing aggregate jumped to 1.57 trillion yuan in August from 808.8 billion yuan the month before.

Japan's second quarter growth revised up, China's inflation slows

Japan's second quarter growth has been revised up to 0.9 percent from the preliminary reading of 0.6 percent.

However, the good news for the second quarter was not quite matched by data for August.

The consumer confidence index for general households fell for the third consecutive month in August to 43.0 from 43.6 in July.

The Cabinet Office's economy watchers survey showed that the current conditions index fell for the fifth consecutive month in August to 51.2 from 52.3 in July. The future conditions index fell to 51.2 from 53.6.

Meanwhile, over in China, a report on Monday showed that inflation slowed to 2.6 percent in August from 2.7 percent in July. Producer prices rose 0.1 percent in August from the previous month, the first increase in six months, but were still down 1.6 percent from the previous year.

On Sunday, another report from China had shown that the trade surplus widened in August as exports rose 7.2 percent from the previous year and imports rose 7.0 percent.

Global economy improves despite disappointing US jobs data

Reports on the global economy last week were generally positive.

Surveys of purchasing managers around the world showed that the global economy accelerated in August. The JPMorgan global all-industry output index rose to 55.2 last month, its highest level since February 2011, from 54.0 in July.

JPMorgan Global All-Industry Indices
	Jul	Aug
Output	54.0	55.2
New orders	53.1	54.8
Input prices	55.4	53.9
Employment	51.0	52.2

In the United States, the Institute for Supply Management's manufacturing PMI rose to 55.7 in August from 55.4 in July while its non-manufacturing index rose to 58.6, the highest since December 2005, from 56.0.

Less positively for the US, Markit's manufacturing PMI for the country fell to 53.1 in August from 53.7 in July.

And employment increased by 169,000 in August, less than economists had expected. With the employment count in the previous two months being revised down by a total of 74,000 jobs, the latest employment report indicates a loss of momentum in US job creation.

Still, the employment situation in the US is far from bleak. Another report last week showed that initial claims for unemployment benefits fell 9,000 to 323,000 in the week ending 31 August, pulling the four-week moving average down 3,000 to 328,500, its lowest since October 2007.

In the euro area, the economy continued to show improvement with Markit's composite output index for the region rising to 51.5 in August from 50.5 in July. The manufacturing PMI rose to 51.4 from 50.3 and the service business activity index rose to 50.7 from 49.8.

China's economy also appears to be regaining momentum. The official manufacturing PMI from the National Bureau of Statistics and the China Federation of Logistics and Purchasing hit a 16-month high of 51.0 in August from 50.3 in July while HSBC's manufacturing PMI rose to 50.1 from 47.7.

In the services sector, the official non-manufacturing index fell to 53.9 in August from 54.1 in July but HSBC's services PMI rose to 52.8 from 51.3, pulling its composite output index for China back into expansion territory at 51.8 in August from 49.5 in July.

Japan's economy also showed signs of regaining momentum last week. Markit's composite output index for Japan rose to 51.9 in August from 50.7 in July, with the manufacturing PMI rising to 52.2 from 50.7 and the services business activity index rising to 51.2 from 50.6.

In addition, Japan's index of coincident economic indicators rose 0.9 point in July while its index of leading economic indicators rose 0.6 point.

US employment disappoints but Fed may still proceed with taper

Economic data on Friday were mostly weaker than expected.

In the US, employment increased by 169,000 in August, less than the median forecast of 180,000 from a Bloomberg survey. In addition, revisions subtracted a total of 74,000 jobs to the employment count for the previous two months.

The unemployment rate fell to 7.3 percent, the lowest since December 2008. However, this was due to workers leaving the labour force.

Despite the disappointing employment report, expectations for the Federal Reserve to start tapering its bond purchases soon were little changed. From Reuters:

Expectations for a modest cut in the U.S. central bank's monthly bond purchases at the upcoming meeting were mostly intact after a mixed August payroll report, released earlier on Friday.

Most economists at U.S. primary dealers expect the Fed to ease back on stimulus after the September 17-18 discussions, according to a Reuters poll which showed such bets had firmed in the last month.

Esther George, the Kansas City Fed's consistently hawkish leader, said she favored trimming bond purchases from their current $85 billion a month when policymakers next meet.

But Chicago Fed President Charles Evans, like George a voter on the policymaking committee this year, stressed a move to taper was not a done deal. He would weigh other evidence about the durability of the economic recovery, although he said he could be swayed toward a pullback.

Elsewhere in the world, German industrial production fell 1.7 percent in July, thus mostly reversing the 2.0 percent jump in June. Another report in Germany showed that exports fell 1.1 percent in July.

In the UK, manufacturing production rose 0.2 percent in July after having jumped 2.0 in June. However, overall industrial production was unchanged in July.

The UK goods trade deficit widened to 9.85 billion pounds in July as exports fell 7.6 percent while imports declined 1.0 percent.

On a more positive note, Japan reported that its index of coincident economic indicators rose 0.9 point in July while its index of leading economic indicators rose 0.6 point.

BoJ, ECB and BoE leave monetary policies unchanged

Several of the most important central banks in the world concluded their monetary policy meetings on Thursday, but none initiated any new measures.

The Bank of Japan upgraded its assessment of the economy and said that further policy moves would depend on inflation.

The European Central Bank left its key interest rate unchanged at 0.5 percent with President Mario Draghi telling a news conference that he was “very, very cautious about the recovery” and that he stands “ready to act”.

The Bank of England also left monetary policy unchanged, as did Sweden's Riksbank.

Despite the lack of fresh policy moves from these central banks, global bond yields rose on Thursday as positive economic data from the US suggest that at least the Federal Reserve may be close to slowing its bond purchases.

The Institute for Supply Management said on Thursday that its US services index rose to 58.6 in August, its highest since December 2005, from 56.0 in July.

ADP reported that private employers in the US added 176,000 jobs in August.

In another sign of an improving US labour market, new claims for jobless benefits fell 9,000 last week to 323,000 and the four-week moving average fell 3,000 to 328,500, its lowest since October 2007.

Dampening some of the optimism on the US economy, though, was a 2.4 percent fall in new orders for manufactured goods in July, the most in four months.

Also seeing a fall in factory orders in July was Germany, where orders fell 2.7 percent. However, this was mostly a reversal of the boost that orders received in June from the Paris Air Show, when orders had jumped 5.0 percent.

Europe out of recession, China and US maintain growth

A report on Wednesday confirmed that the eurozone economy grew 0.3 percent in the second quarter to bring its recession to an end. Exports to the rest of the world rose sharply in the quarter after falling for six months, while government spending made its first positive contribution to the economy since late 2009.

Another report on Wednesday showed that retail sales in the euro area rebounded 0.1 percent July after having fallen 0.7 percent in June.

In another sign of recovery in the euro area, Markit reported on Wednesday that its composite index for the region rose to 51.5 in August from 50.5 in July, with the service sector index rising to 50.7 from 49.8.

Outside the euro area in Europe, the UK reported yet more strong data on Wednesday. The Markit/CIPS UK services PMI rose to 60.5 in August, the highest since December 2006, from 60.2 in July, marking the first back-to-back readings above 60 since 1997.

Elsewhere in the world, China's services sector also showed signs of improvement in August. The Markit/HSBC services PMI for China rose to 52.8 last month from 51.3 in July.

Meanwhile, the US economy maintained a “modest to moderate” pace of expansion from early July through late August, the Federal Reserve reported in its Beige Book on Wednesday.

Indeed, the US trade deficit widened in July as improving demand led to a 1.6 percent increase in imports. Exports fell 0.6 percent though.

OECD sees improved outlook for advanced economies

The Organisation for Economic Cooperation and Development said on Tuesday that the economic outlook for advanced economies is improving.

The US is expected to lead with growth of 1.7 percent this year, although that is down from the OECD's May forecast of 1.9 percent. Japan is expected to grow 1.6 percent, unchanged from the OECD's May forecast.

Europe is now expected to join the recovery, with Germany seen growing 0.7 percent and France 0.3 percent, although Italy is still expected to contract.

Outside the euro area, the UK is expected to grow 1.5 percent, sharply up from the May forecast of 0.8 percent.

However, apart from China, which is expected to grow 7.4 percent this year, the OECD sees a slowdown in many emerging countries.

Economic data on Tuesday were mostly consistent with the OECD's outlook.

In the US, the Institute for Supply Management reported that its US manufacturing PMI rose to 55.7 in August, its highest since June 2011, from 55.4 in July.

Markit's US manufacturing PMI was not as strong, falling to 53.1 in August from 53.7 in July.

Another report from the US on Tuesday showed that construction spending rose 0.6 percent in July.

Meanwhile, the UK added to its recent string of strong economic data on Tuesday. The Markit/CIPS construction PMI rose to 59.1 last month, its highest level since September 2007, from 57.0 in July.

However, China's services activity eased a little in August. The National Bureau of Statistics reported on Tuesday that its non-manufacturing PMI fell to 53.9 last month from 54.1 in July.

Markets rise as manufacturing expands in Europe and China

After a turbulent August, markets made a positive start to September on Monday as data from Europe and China indicated expansion in manufacturing activity.

The MSCI All-Country World Index rose 0.6 percent. The STOXX Europe 600 Index in particular jumped 1.9 percent, the most in eight weeks.

A report from Markit on Monday showed that its manufacturing PMI for the euro area rose to 51.4 in August, the highest in 26 months, from 50.3 in July.

UK manufacturing performed even better. The Markit/CIPS manufacturing PMI jumped to 57.2 last month, the highest in 18 months, from 54.8 in July.

Also showing improvement, albeit more modestly, was China's manufacturing sector. HSBC's manufacturing PMI for China rose to 50.1 in August from 47.7 in July, thus indicating an end to three months of contraction.

The HSBC data on Monday followed a report on Sunday from the National Bureau of Statistics that showed the latter's manufacturing PMI for China hitting a 16-month high of 51.0 in August from 50.3 in July.

Japanese economy looking better again

After reporting some weaker economic data earlier this month, the Japanese economy is starting to look better again.

The Finance Ministry reported on Monday that capital spending was unchanged in the second quarter compared to the previous year. This was an improvement over the 3.9 percent decline in the first quarter.

Excluding software, capital spending rose 1.4 percent in the second quarter over the previous year after having fallen 5.2 percent in the first quarter.

Economic reports last Friday had also been positive.

Household spending rose 0.9 percent in July.

The unemployment rate fell to 3.8 percent in July from 3.9 percent in June.

Consumer prices excluding fresh food rose 0.7 percent from a year earlier, the biggest increase since November 2008.

Industrial production rose 3.2 percent in July after having fallen 3.1 percent in June.

And the Markit/JMMA manufacturing PMI rose to 52.2 in August from 50.7 in July, with output rising at the fastest rate in 30 months.