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May 29, 2017

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Positive China data fail to give world markets a boost

LONDON/HONG KONG--Signs of strengthening Chinese manufacturing weren't enough to broadly lift world markets Thursday, as investors await key U.S. economic data and digest a slew of bad earnings reports.

European markets opened slightly higher Thursday, while U.S. futures were down and Asian markets were mixed.

"There's no new stimulus packages," said Andrew Holland, chief executive of investment advisory at Ambit Capital in Mumbai. "We're back to fundamentals and the earnings season in the U.S. and Europe is not that great. I'm hoping China will be the one that changes things."

He said he hopes the once-in-decade leadership transition in China next week will bring with it some form of stimulus.

Chinese stocks led gains Thursday, after two manufacturing surveys, one government sanctioned and the other by a private company, both showed improvement for the month of October.

China's Shanghai Composite index rose over 1.7 percent, to 2,104.4, its biggest jump in three weeks. Hong Kong's Hang Seng index rose 0.8 percent, to 21,821.8. Stocks in Taiwan also gained.

"The positive PMI data suggested a higher demand for material might be needed for economic growth," said Peng Yunliang, an analyst based in Shanghai.

Gains in Japan were tempered by losses at leading electronics manufacturers. Sony Corp. said Thursday it had pared quarterly losses to US$193 million, while Sharp Corp. said its losses for the first half of the fiscal year jumped nearly 10-fold, to US$4.9 billion. The reports come on the heels of Panasonic's warning Wednesday that it would post a US$9.6 billion loss for the fiscal year through March, among the biggest in Japan's manufacturing history and far more than expected. Panasonic stock plunged over 19 percent Thursday.

Investors were also underwhelmed by the Bank of Japan's Tuesday stimulus announcement, a bond-buying program designed to boost growth and combat deflation, said Andrew Sullivan, an independent analyst formerly with Piper Jaffray in Hong Kong.

"There's still concern after the Bank of Japan didn't do as much as the market had hoped for," he said. "Is the government really prepared to act decisively?"

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