China and Japan show hints of healing, rest of Asia still struggling

Wed Jul 1, 2015 3:52am EDT
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By Ian Chua

SYDNEY (Reuters) - Growth in China's services sector picked up in June while big Japanese companies planned to ramp up spending at the fastest pace in a decade, offering hope that prospects are improving for Asia's largest economies despite sluggish factory growth.

Wednesday's data fueled expectations that the wobbly global economy may start leveling out in the second half of the year, but the outlook remains murky, with fears that Greece's debt crisis could splinter the euro zone and worries about whether China can avoid a stock market crash keeping investors on edge.

Activity in China's factory sector expanded slightly in June though not as much as expected, official surveys showed, suggesting the economy may be starting to slowly level out after a raft of support measures including interest rate cuts and more infrastructure spending.

Japanese factories barely expanded but a private report showed a strong pick-up in export orders, while a Bank of Japan survey showed a strong bounce in business confidence and spending plans, a welcome sign for premier Shinzo Abe's economic revival strategy which has seen limited success in nudging firms to boost wages and investment.

"When you have two of the biggest economies in the world showing positive readings, that is encouraging. They also come on the back of some good readings out of the United States," said Craig James, chief economist at CommSec in Sydney.

Yet reports from South Korea, Taiwan and Indonesia provided a more sobering read that still pointed to challenging conditions for many economies in the region.

The unending uncertainty over Greece also dampened confidence, though Asian markets held up well on Wednesday.

Similar activity surveys are due from Europe and the United States later in the day.   Continued...

Pedestrians cast their shadows  on a wall at a construction site in Beijing in this December 12, 2014 file photo. REUTERS/Kim Kyung-Hoon/Files