Business Blog Posts

TOKYO Reuters Asian stocks rose to a two-week high, with Japans Nikkei briefly rising more than 2 percent, as strong U.S. manufacturing data further soothed worries about the global economy.

The dollar and the yen began the day on the defensive, while commodities gained, helping make materials shares some of the strongest performers across the region as gold steadied after a two-month top hit on Wednesday.

The Institute for Supply Management said its index of U.S. factory activity rose to 56.3 in August from 55.5 in July, much higher than forecast by economists.

Coming on the heels of strong Chinese manufacturing data and stronger-than-expected growth in Australia, the numbers eased investor fears about the pace of global economic recovery and helped Wall Street to its best day in eight weeks. .N

But gains in Asian stocks, which were also boosted by gains in tech shares, appeared capped by wariness about whether the global economy is truly on the path to recovery, as well as concern about closely watched U.S. nonfarm payrolls data on Friday.

"Its too early to say worries about a double-dip recession in the economy have been wiped away just because Chinas PMI, Australias GDP and U.S. data werent bad," said Masahiko Sato, an executive director at Nomura Securities equity marketing department.

"But stocks may become more resilient to poor economic indicators going forward and gain further if money that had shifted to bonds on extreme concern over the economy comes back to equities, early signs of which have likely appeared in U.S., Germany and U.K. bonds after yesterdays data."

The MSCI index of Asia Pacific stocks outside Japan .MIAPJ0000PUS rose 0.8 percent to its highest level since mid-August.

Japans benchmark Nikkei .N225 rose more than 2 percent at one point, moving further away from a 16-month low hit on Wednesday, helped by what some market players said was buying by domestic institutional investors at lows and buying of futures by foreign players.

But the Nikkei pared gains to 1.2 percent by midday. It lost 7.5 percent in August and is down roughly 14 percent on the year.

Seoul shares .KS11 rose 0.3 percent, boosted by tech stocks, with market players saying foreign investors, cheered by the rise on Wall Street, could turn strong buyers.

Australian stocks .AXJO rose 0.8 percent to a three-week high, with miners such as Rio Tinto RIO.AX gaining after copper prices rose to a four-month high.

STEADY DOLLAR

The dollar index, a gauge of the greenbacks performance against a basket of six major currencies, was steady on the day at 82.528 .DXY after falling 0.9 percent on Wednesday, marking its biggest one-day fall in six weeks.

The dollar edged down 0.2 percent to 84.27 yen but still stayed above a 15-year low of 83.58 yen hit last week.

Through the ISM data boosted higher-yielding currencies such as the Australian dollar, investors have now turned hesitant about taking fresh positions ahead of the European Central Banks policy meeting later in the day and Fridays closely watched monthly U.S. job report, a trader said.

Spot gold edged up to $1,246.70 an ounce, after hitting $1,254.65 on Wednesday, its highest since June 28.

Oil held onto most of the previous sessions gain of 2.8 percent after the strong manufacturing data in top consumers the United States and China raised hopes record oil inventories will draw down.

U.S. crude for October delivery was steady at $73.91 a barrel at 0211 GMT after a jump of nearly $2 on Wednesday.

Additional reporting by Aiko Hayashi in Tokyo; Editing Kazunori Takada.

MELBOURNE/HONG KONG Reuters China is stepping up attempts to hamper BHP Billitons $39 billion hostile offer for Potash Corp, amid worries about future supplies of fertilizer it needs to rapidly boost food production.

Chinas state-run Sinochem has hired HSBC to advise it on its options regarding Potash Corp, the worlds largest fertilizer maker, the Wall Street Journal reported in a blog on Wednesday.

Citing a person familiar with the situation, the WSJ said the Chinese companys move is preliminary and doesnt mean it has decided to make a counterbid for Potash.

On Wednesday, a Chinese newspaper reported Beijing was also considering launching an anti-monopoly investigation into the deal.

A Sinochem spokesman in Beijing was not immediately available for comment, while HSBC in Hong Kong declined to comment.

Potash Corp has held discussions with Sinochem, a source close to the matter told Reuters in August.

Sinochems options may be limited due to Canadian government worries. The energy minister of Saskatchewan, Potash Corps home base, said the province would have "lots of concerns" about a Chinese sovereign fund or state-owned company buying part or all of the company.

"Thats where some of the concern would be: having a customer whose interests obviously are to have very low prices," Energy Minister Bill Boyd told Reuters in an interview this week.

QUESTION OF PRICE

If HSBC has snared a mandate with Sinochem, that would be significant as HSBC did not rank within the top 25 mergers and acquisitions advisers worldwide in 2009, while Morgan Stanley was No.1, according to Thomson Reuters data.

Potash Corp shares slipped 0.9 percent on Wednesday to $145.95, while the U.S. market rose, reflecting creeping doubts about the chances of a rival bid emerging.

But the stock was still 12 percent above BHPs offer of $130 a share, with investors holding out for a higher offer.

BHP shareholders on average see $155 a share, or $46 billion, as the maximum BHP should pay for Potash Corp, according to a Reuters poll, while Potash shareholders see $162 a share clinching a deal, according to a separate Reuters poll.

BHP investors do not need to approve the $38.6 billion bid. However under UK listing rules, they would have to vote on a deal if the offer is raised to 25 percent of BHPs total market value.

Based on BHPs market value on Thursday, the offer would have to be hiked to at least $45.3 billion to trigger a vote of its own shareholders.

"Even uncontested, theyll pay too much," said a Melbourne-based fund manager whose fund owns BHP shares. "Once it gets into the $160s, youll get a fairly negative shareholder reaction."

CHINA REACTION

Chinas reaction to BHPs move has also been wary, with Beijing mulling an anti-monopoly investigation into BHPs bid for Potash Corp, China Business News said on Wednesday.

It is not clear what steps Chinese regulators could take against the bid, as BHP does not currently have any potash production, although it is planning to develop the worlds largest potash mine, the Jansen project in Canada.

China buys about 7 percent of the output of Potash Corp, which controls around one-fifth of world production of the key crop nutrient.

"In order to protect Chinese farmers interest, we hope that some big Chinese companies will make a bid," Chen Li, a fertilizer expert at China National Chemical Information Center told Reuters Insider television.

"We believe that China has a few candidates. For instance Sinochem, or Chinese private equity funds, as well as other international companies," she said, adding that money shouldnt be an obstacle.

"If its in the interest of Chinese farmers, the Chinese government and Chinese investment institutions can help out."

COUNTERBIDDERS SCARCE?

Bankers not advising BHP or Potash Corp, such as Morgan Stanley and Australias Macquarie Group, are scrambling to find potential bidders to enter the fray, bankers have said.

Rio Tinto, Brazils Vale and Canadas Teck Resources are all seen as unlikely to get into a bidding war against BHP as they have other priorities or dont have the balance sheet strength.

At $39 billion, some BHP investors are already nervous about the deal and would prefer if BHP returned some of its cash pile to shareholders.

"Ive said since day one, we think its more accretive for shareholders for BHP to return capital. And we dont think diversification for diversifications sake is a reason to buy Potash Corp," said James Bruce, portfolio manager at Perpetual Investments, based in Sydney.

Additional reporting by Megan Davies in NEW YORK and Alison Leung in HONG KONG; Editing by Ed Davies and Lincoln Feast