1:46 AM
China, India offer reprieve from euro debt fears
Addison Ray
By Langi Chiang and Anooja Debnath
BEIJING/BANGALORE | Wed Dec 1, 2010 2:36am EST
BEIJING/BANGALORE (Reuters) - Factories in China and India cranked production up a gear last month, offering a small boost to the global economy faced by a spreading debt crisis in the euro zone and sluggish recoveries in the United States and Japan.
But manufacturing surveys in both Asian giants also highlighted a worry that has clouded the outlook for investors: rising inflationary pressure and the need for more monetary tightening in fast-growing developing economies.
That could be a bitter pill to swallow with Europe teetering on the brink of more serious debt troubles. The euro stabilized on Wednesday after falling a day earlier on concern that member states may ultimately be forced to default.
Deputy finance ministers from the Group of 20 economies discussed "the financial situation in Europe" on Monday Asia time in a teleconference arranged last week, a senior G20 source in Asia said.
The manufacturing sector in Asia provided some solace from the gloomy prognosis in Europe.
Two purchasing managers' indexes in China registered their strongest readings in more than half a year and helped lift Asian shares outside Japan .MIAPJ0000PUS by 0.6 percent.
The story was similar in India, where the HSBC Markit PMI climbed to a six-month high.
While a rise in output and new orders drove the PMI gains in China, the biggest increases came in input prices.
"Good news from the economy may not be that good for the market as it is concerned about more tightening," said Ting Lu, an economist with Bank of America-Merrill Lynch.
"The high PMI reading could convince Beijing to tighten a bit more on the margin."
ASIAN RESILIENCE?
The strong Indian PMI followed data on Tuesday that showed its economy grew by a blistering 8.9 percent in the September quarter from a year earlier.
That is likely to add pressure on the central bank to continue raising interest rates, though traders do not expect another hike until early next year.
South Korea was another bright spot in Asia. Exports from the region's fourth-largest economy rose slightly more than expected in November from a year earlier, while a key index measuring its manufacturing-sector activity reversed a six-month falling streak.
But in Asia's leading developed economy, the picture was far less rosy.
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