GLOBAL MARKETS-Asian stocks edge up after strong China manufacturing survey

(China's Caixin factory PMI hits best level in almost decade)
* Australia shares hit four-week low ahead of policy rate
* Dollar hits two-year trough as Fed commits to easy policy
* Despite stock pullback, S&P posts best August since 1986

By Paulina Duran and Alwyn Scott
SYDNEY/NEW YORK, Sept 1 (Reuters) - Asian stocks edged
higher on Tuesday after strong readings on China's vast
manufacturing sector offset the weak lead from a softer Wall
Street session.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS rose 0.2%, to regain some ground it had lost on
Monday.
The Hang Seng Index in Hong Kong .HSI traded 0.18% higher
while the Shanghai Composite .SSEC also recovered early losses
to stand 0.1% higher. Japan's Nikkei 225 .N225 erased early
losses to trade flat.
The Caixin/Markit Manufacturing Purchasing Managers'
Index(PMI) showed China's factory activity expanded at the
fastest clip in nearly a decade in August, bolstered by the
first increase in new export orders this year.
"What we are seeing here is the slow but choppy export
recovery that is taking a bit longer than maybe some market
participants thought it would - and that's because markets
remain largely out of sync," said Daniel Gerard, senior multi
asset strategist at State Street Global Markets, based in
Singapore.
"September is also going to be a choppy recovery, and until
we get closer to more news about a vaccine it's going to remain
that way."
Taiwan stocks .TWII gained 0.5% after the United States
said on Monday it was establishing a new bilateral economic
dialogue with the country, an initiative it said was designed to
support Taipei. Australia's S&P/ASX 200 .AXJO was an outlier, declining
2.4% to four-week lows on rising diplomatic tensions between
Canberra and Beijing. On Wall Street, the Dow Jones Industrial Average and the S&P
500 ended in the red overnight, while the Nasdaq rose solidly.
The S&P gained more than 7% for the month to notch its best
August since 1986 in what is traditionally a softer month for
stock performance.
Wall Street declines overnight were mostly caused by
month-end portfolio rebalancing "rather than a new trend in
equities," said Rodrigo Catril, senior FX strategist at NAB
Market Research in Sydney.
The Nasdaq fared even better than the S&P for the month, up
nearly 10% as it rallied for a fifth straight month. In currencies, the dollar dropped against a basket of major
currencies early on Tuesday. The dollar index =USD fell 0.4%,
with the euro EUR= up 0.5% to $1.1993.
The Japanese yen strengthened 0.3% versus the greenback at
105.63 per dollar, while Sterling GBP= was last trading at
$1.3410, up 0.3% on the day.
Expectations that the Fed will keep interest rates low for
an extended period kept the dollar soft, marking a fourth
straight month of declines in August, its longest losing streak
since 2017.
Fed Vice Chair Richard Clarida on Monday expanded on
Governor Jerome Powell's comments from last week, saying that
under the U.S. central bank's new policy view, a low rate of
unemployment does not on its own trigger higher interest rates.
Last week, the Fed said its new strategy plan is to use
higher inflation when the economy is robust to offset the impact
of periods of weaker prices. Investors in Asia await an interest rate decision from the
Australian central bank. While the Reserve Bank of Australia is
not expected to change policy, its commentary on the economic
outlook will be closely watched.
The Australian dollar stood up 0.4% at $0.7470 AUD=D4 .
In commodity markets, oil prices rose, reversing overnight
losses, as investors shifted to risk assets.
Brent crude LCOc1 climbed 27 cents, or 0.6%, to $45.55 a
barrel, after rising 0.5% to $45.28 on Monday. U.S. crude CLc1
rose 21 cents, or 0.5%, to $42.82 a barrel, having fallen 0.8%
in the previous session.
Elsewhere, gold gained to $1,980 an ounce XAU= , up 0.6% on
the day. GOL/

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