Shanghai up after soft China PMI, Tokyo lifted by weak yen

Shanghai advanced in early trade Thursday after another tepid reading on Chinese manufacturing activity that will likely raise hopes for fresh monetary easing, while Japanese shares pushed on to new 15-year highs thanks to a weaker yen.

The dollar held up despite minutes from the Federal Reserve's April policy meeting showing board members thought it unlikely the US economy would be strong enough to hike interest rates in June.

Tokyo rose 0.42 percent, Shanghai gained 0.31 percent and Sydney put on 0.65 percent but Hong Kong lost 0.43 percent and Seoul eased 0.72 percent.

A preliminary reading of HSBC's purchasing managers index (PMI) for China showed activity picked up in May but continued to shrink, despite Beijing's efforts to kick-start the sluggish economy, including three interest rate cuts since November.

The index registered 49.1 this month, a two-month high but still below the 50 mark that separates contraction from growth. It was at 48.9 in April.

"It remains extremely hard if not impossible for any revival to be sustained," Wang Tao, chief China economist at UBS Group AG in Hong Kong, wrote in a report before the data release.

"Further policy support is still needed to stabilise China's growth momentum and arrest the passive tightening of monetary conditions," Wang said, according to Bloomberg News.

Traders were given a weak lead after the Dow and S&P 500 closed lower following the Fed minutes, which raised concerns about the state of the world's top economy.

"Many participants" at the US central bank latest meeting "thought it unlikely that the data available in June" would meet conditions required for a rate hike, the minutes said.

Policymakers expressed concern about weak economic reports in the first quarter, although these data were generally viewed as due to "transitory" factors, such as severe winter weather and the West Coast port strike that ended in late February.

The Dow fell 0.15 percent and the S&P 500 slipped 0.09 percent but the Nasdaq edged up 0.03 percent.

The minutes pressed on the dollar, with the unit buying 121.17 yen in early trade, down from 121.32 yen in New York but still up from 121.02 yen in Tokyo earlier Wednesday.

The euro bought $1.1114 and 134.66 yen against $1.1096 and 134.61 yen in US trade.

Oil prices were lower but analysts said losses were limited after a drop in US petroleum supplies and production raised optimism that a global supply glut will ease soon.

US benchmark West Texas Intermediate for July delivery fell 17 cents to $58.81 while Brent crude for July eased five cents to $64.98.

Gold fetched $1,211.19 compared with $1,208.82 late Wednesday.