* MSCI Asia ex-Japan eke out small gains, Nikkei hits 6-week
* Euro hovers near 2-year low against dollar
* HSBC China flash PMI at 5-month peak on output bounce
* Spanish bill auctions eyed
* European shares seen mixed at open
By Chikako Mogi
TOKYO, July 24 Asian shares inched higher on
Tuesday, helped by improving Chinese manufacturing data, but the
euro remained under pressure as surging Spanish borrowing costs
stoked fears that the euro zone's fourth-largest economy will be
forced to seek a bailout.
The HSBC flash China manufacturing purchasing managers index
rose to a five-month high in July, driven up by a jump in the
output sub-index and signs of an improvement in new export
orders that offered some relief to fragile markets.
Asian shares erased earlier losses while oil and copper rose
after the Chinese data, pushing the commodity-linked Australian
dollar up to $1.0288 from around $1.0265.
The euro also received a temporary boost before retreating
to stand not far from a two-year low against the dollar and a
near 12-year low against the yen.
The single currency was undermined by Moody's Investors
Service changing its ratings outlook to negative for Aaa-rated
Germany, the Netherlands and Luxembourg amid Europe's ongoing
"China's PMI data beat market expectations and gave shorts a
reason to cover today," said Orient Futures derivatives director
Andy Du, referring to buying by short-sellers to realise their
gains on earlier bets that markets would fall.
It was the first significant Chinese data in the third
quarter and signalled that pro-growth government policies may be
gaining traction in the world's second-largest economy.
MSCI's broadest index of Asia-Pacific shares outside Japan
edged up 0.2 percent, after spending most of the
session in negative territory. It tumbled 2.4 percent on Monday
for its biggest one-day drop in about two months.
Japan's Nikkei stock average also steadied after
earlier slipping to a six-week low.
Brent crude rose 0.8 percent to $104.03 a barrel and
U.S. crude added 0.8 percent to $88.81, while copper
jumped 1.1 percent to $7,485 per tonne on China's PMI.
"The data gave a slight boost to markets, but whether such
effects are sustainable are doubtful as Europe struggles with
its problems," said Hiroyuki Kikukawa, general manager at
trading company Nihon Unicom.
"Government policies will underpin the Chinese economy over
the longer term, but in the short-term, instability in the
European situation will keep a drag, especially as Europe is a
big export market for China," he said.
European stocks were seen mixed and U.S. stock futures
were barely changed. Financial spreadbetters called the
main indexes in London, Paris and Frankfurt
to open between a 0.4 percent fall and a 0.3 percent
Hong Kong's stock market opened up 0.1 percent after
the morning session was cancelled due to Typhoon Vicente.
CRISIS IN RISING YIELDS
The euro was at $1.2126, off a 25-month low of
$1.2067 hit on Monday, and stood at 94.87 yen, barely
above its lowest since November 2000 of around 94.23 yen
marked on Monday.
Downside pressures remained strong for the euro, with euro
zone manufacturing data due later on Tuesday likely to confirm
growth deteriorating further.
Greece, which only last month staved off a deeper crisis by
having pro-bailout parties win an election, was also scheduled
on Tuesday to meet its troika of creditors - the European Union,
European Central Bank and the International Monetary Fund - to
renegotiate rescue payments that are crucial to keeping indebted
Athens afloat and within the euro zone.
Fears about Spain possibly needing a fully-fledged bailout
intensified investor flight to safety and pushed the 10-year
U.S. Treasury yield down to a record low 1.3977
percent, while five- and 10-year German government bond yields
also set new lows on Monday.
In contrast, Spanish 10-year borrowing costs
surged to a euro-era high above 7.5 percent on Monday.
Andrew Wilkinson, chief economic strategist at Miller Tabak
& Co in New York, said the flattening of the Spanish yield curve
reflected how investors have grown increasingly concerned about
perceived risks facing Spain.
"Rising yields are in turn adding to a sense of crisis: If
the regions ask for cash, how will the government fund itself?
The brave Spanish matador appears to be pinned to the perimeter
fence by the angry bull," Wilkinson said.
Spain faces a litmus test later on Tuesday with debt sale
of 3 billion euros in 3- and 6-month bills.
Asian credit markets recovered slightly as other assets
trimmed losses, with the spread on the iTraxx Asia ex-Japan
investment-grade index wider by just 1 basis point.
Gold was capped, up 0.1 percent at $1,577.55 an
ounce, with both its 55- and 100-day moving averages having
crossed below the 200-day moving average in April to imply a
bearish technical outlook. Analysts expect gold to find support
at its 2012 low near $1,521 and resistance at $1,641.