China data, Basel accord buoy shares and euro

Singapore: Shares in Asia and Europe rose on Monday and the euro surged on buoyant Chinese factory data and as a deal on global bank rules gave lenders some respite before having to raise hundreds of billions of dollars in fresh capital.

Japan's benchmark Nikkei average closed 0.9 per cent higher, while the MSCI index of Asian shares outside Japan jumped 1.8 per cent as encouraging Chinese and US data encouraged investors to return to riskier assets.

An index of leading European shares rose 0.7 per cent, while US S&P 500 futures advanced nearly 1 per cent, pointing to a stronger opening on Wall Street later in the day.

"We are seeing quite decent data, especially from China, and the US data also helped," said Lorraine Tan, director of Asia equity research at S&P in Singapore.

Major shock

"We do think markets are bottoming out... Unless there is a major shock, markets will trend upwards."

Chinese factories increased production in August and money growth easily topped analysts' expectations, according to data on Saturday, showing that the economy remained buoyant despite government efforts to clamp down on bank lending and property speculation.

Data on Friday showed US wholesale inventories surged the most in two years in July, adding to signs that economic growth in the third quarter of the year may prove a bit stronger than many forecasters had expected. The US trade gap also narrowed sharply in July.

The reports pushed up major US stock indexes by as much as 0.5 per cent.

While the US economy still seems mired in a slow-growth path, recent data have helped dispel some fears that it might be sliding back into recession.

Easing the burden

Big banks were among the day's leaders in Asia after global bank regulators agreed in Basel, Switzerland, on Sunday to force banks to more than triple the amount of top-quality capital they must hold in reserve to prevent any repeat of the international credit crisis.

But to ease the burden, regulators gave the banks transition periods to comply. These periods, extending in some cases to January 2019 or later, are longer than many analysts had expected.

Top European lender HSBC rose more than 2 per cent at one point in Hong Kong, with some of Japan's leading banks also seeing strong gains.

"It's a mixed blessing for the banks, but I'm sure investors will be happy to get some clarity and allow the market to move on," said Robbert Van Batenburg, head of equity research at Louis Capital Markets in New York, said of the new rules, known as Basel III.

"[The] ... best thing is it removes the uncertainty that was hanging over the market... The markets should take this favourably."

The US Federal Reserve System's Board of Governors said the decision should help minimise future financial meltdowns.

"The agreement represents a significant step forward in reducing the incidence and severity of future financial crises, providing for a more stable banking system that is less prone to excessive risk-taking, and better able to absorb losses."