By Patrick Chu and Masaki Kondo Jan. 4 (Bloomberg) -- Asian stocks and the dollar rose while Treasuries fell on the first trading day of 2010 as China’s manufacturing expanded at the fastest pace in more than five years and the outlook for American job losses improves. Oil gained after freezing weather hit the U.S. The Morgan Stanley Asia Pacific Index rose 0.6 percent to 121.23 as of 1:50 p.m. in Tokyo. The euro weakened as much as 0.5 percent against the dollar and the pound fell as much as 0.4 percent. Futures on the Standard & Poor’s 500 rose 0.4 percent. The yield on the 10-year Treasury note climbed to 3.86 percent, the highest in almost six months, according to BGCantor Market Data. Natural gas futures for February delivery gained as much as 4.5 percent. Crude oil advanced 0.8 percent to $80 a barrel. Businesses in China, which led the recovery from the first global recession since World War II, continued to expand last month, as a purchasing managers’ index climbed to a seasonally adjusted 56.1 from 55.7 in November, HSBC Holdings and Markit Economics said. The U.S. will report on Jan. 8 that payrolls fell in December by the smallest amount since the recession began two years ago, according to the median of 58 economists in a Bloomberg News survey. “Asia is expected to remain the engine of growth for the world’s economy,” said Hiroshi Morikawa, a senior strategist at MU Investments Co., which manages $13 billion in Tokyo. “The first trading day of a year is often seen as a predictor of the year’s market climate. People are hoping this year will be better than last year and are becoming more responsive to good news.” Asia Outlook The MSCI Asia Pacific Index climbed 34 percent last year, the best annual advance since 2003. Emerging-market stocks may gain 25 percent this year, boosted by a sustained recovery in the U.S., Credit Suisse Group AG said. The MSCI Emerging Markets Index soared 75 percent last year, while the MSCI World Index of developed economies advanced 27 percent. The Nikkei 225 Stock Average rose 1 percent today while Hong Kong’s Hang Seng Index fell 0.3 percent. “It’s too early for the global recovery to come to an end and China will be still be a main driver of growth,” said Mark Tan, who helps oversee $11 billion at UOB Asset Management Ltd. in Singapore. Japanese exporters advanced after the yen weakened to as much as 93.15 per dollar on Dec. 31, the lowest since Sept. 7, before strengthening to 92.76. JAL Credit Honda Motor Co., which gets 42 percent of its revenue from North America, gained 1.8 percent to 3,165 yen. Sony Corp., whose overseas sales account for 70 percent of its total, climbed 2.5 percent to 2,737 yen. Japan Airlines Corp. soared 33 percent to 89 yen after the government said the Development Bank of Japan will double the amount of credit for the carrier. The dollar strengthened to $1.4291 per euro from $1.4321 last week, and increased to $1.6094 versus the pound from $1.6170 before reports this week forecast to show U.S. manufacturing expanded and factory orders increased, boosting speculation the Federal Reserve will raise interest rates from a record low later this year. Payrolls probably fell by 1,000 workers last month, according to the Bloomberg News survey ahead of the Labor Department report. Asian currencies advanced on speculation overseas investors will pour more funds into regional assets as the global economy recovers. The Korean won rose to its strongest level in almost four weeks after exports climbed at the fastest pace in more than a year in December. “You’re seeing strong inflows into Asian equities, and the data in Asia is encouraging,” said Mitul Kotecha, head of global foreign-exchange strategy at Calyon in Hong Kong. Won, Rupiah Gain The won rose 0.8 percent to 1,155.25 per dollar, the rupiah advanced 0.4 percent to 9,350, while Taiwan’s dollar rose 0.5 percent to NT$31.865. South Korea’s overseas shipments surged 34 percent from a year earlier in December, faster than the median 28 percent increase forecast in a Bloomberg News survey of economists. Treasuries and Australian government bonds declined as signs the global recovery is gaining momentum spurred investors to purchase higher-yielding assets. The yield on the 10-year Treasury rose two basis points to the highest since June 10, according to BGCantor Market Data. The rate on Australia’s benchmark 10-year note climbed nine basis points to 5.73 percent. Pimco Strategy Pacific Investment Management Co., which runs the world’s biggest bond fund, is cutting holdings of U.S. and U.K. debt as government borrowing expands, according to the 2010 outlook of Paul McCulley, a money manager and member of the investment committee. Bond risk in Asia fell, as measured by indexes of credit- default swaps. The Markit iTraxx Asia index of 50 investment- grade borrowers outside Japan dropped 3 basis points to 94.5 basis points as of 8:58 a.m. in Singapore, Barclays Plc prices show. Energy prices rose after cold, windy weather blanketed much of the northern Plains to the East Coast. The U.S. Climate Prediction Center forecast below-normal temperatures from Texas to Maine from Jan. 5 to Jan. 13. Prices also rose on optimism for increased demand from the world’s biggest energy consumer. Natural Gas Jumps Natural gas jumped to $5.799 per million Btu. Heating oil for February delivery rose 1.2 percent to $2.1386 a gallon. Crude was at $79.93 a barrel after hitting $80. Florida orange growers escaped most crop damage over the weekend. Juice futures for March delivery fell 5.7 percent, the most in four months, on Dec. 31 to $1.2905 a pound on ICE Futures U.S. in New York. Corn and wheat rose 1 percent on speculation that fund managers will buy agricultural commodities at the start of 2010 on improved demand as the global economy recovers. Copper in London gained as much as 1.1 percent to $7,454 a metric ton, the highest since September 2008, ahead of a planned strike at Codelco, the world’s largest producer. Gold for immediate delivery dropped 0.2 percent to $1,095.72 an ounce. To contact the reporters on this story: Patrick Chu in Hong Kong at pachu@bloomberg.net. Masaki Kondo in Tokyo at mkondo3@bloomberg.net.

Source