GLOBAL ECONOMY-China, India offer reprieve from euro debt fears

* Chinese, Indian PMIs climb higher despite global worries

* G20 deputy finance ministers convene call about Europe

* Australian growth slows, Japan warns of long deflation

By Langi Chiang and Anooja Debnath

BEIJING/BANGALORE, Dec 1 (BestGrowthStock) – 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 stabilised on Wednesday after falling
a day earlier on concern that member states may ultimately be
forced to default. [ID:nL3E6N103A]

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. [ID:nL3E6N109X]

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 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.
[ID:nTOE6B001C]

“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. [ID:nBMA009007]

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. [ID:nTOE6AR01G]

But in Asia’s leading developed economy, the picture was
far less rosy.

Prolonged economic weakness may keep Japan in deflation
longer than the Bank of Japan’s current forecast, a member of
its policy board said on Wednesday, offering the bleakest view
to date by a central bank policymaker.

Board member Miyako Suda said there was a strong chance
Japan’s economy would contract in the final quarter of this
year after strong growth in July-September. [ID:nTOE6B002F]

She also warned of lingering downside risks to the
export-reliant economy, including market jitters over Europe’s
sovereign debt woes.

Australia also flashed a warning sign, with its economy
growing at the slowest pace in almost two years last quarter,
according to data published on Wednesday. [ID:nSGE6AT0FR]

G20 CALL

Efforts by European policymakers to reassure investors
have so far come up short. Global officials are also focusing
their attention on the problem, with the G20 deputy finance
ministers holding a pre-arranged teleconference about it on
Monday.

“It’s a tradition of the G20 to share information whenever
there’s an important situation going on,” the source, who took
part in the call, told Reuters on Wednesday.

The source added that the participants reviewed the 85
billion euro ($110.7 billion) bailout package for Ireland
announced at the weekend. They discussed what could be done on
the part of the G20, but the source declined to elaborate.

The euro zone’s debt crisis deepened on Tuesday when
investors pushed the single currency lower and spreads on
bonds of fiscally weak member states to new highs.
[ID:nLDE6AT0Z0]

European policymakers came out in force to try to calm
markets, with European Central Bank President Jean-Claude
Trichet warning that pundits were underestimating the
determination of governments to keep the euro zone stable.

But markets paid little attention, pressuring Portugal,
Spain and Italy only days after the EU agreed to an 85 billion
euro ($110.7 billion) bailout for Ireland.

Later in the day, Standard & Poor’s warned it could cut
Portugal’s credit ratings within the next three months if the
country’ growth prospects weaken further or if private
creditors become subordinated to public creditors in a
possible financial aid program.|
(Editing by Ken Wills and Tomasz Janowski)

GLOBAL ECONOMY-China, India offer reprieve from euro debt fears