By Dominique Fong

Aussie stocks soar on unexpected rate cut

Chinese shares rose Tuesday as investors gained confidence from President Xi Jinping's recently stated support of the "healthy development" of the country's stock markets.

   The Shanghai Composite Index   gained 1.7%, while the smaller Shenzhen Composite Index rose 2.2%. 

Elsewhere in Asia, stock markets were mixed: Korea's Kospi was up 0.3% and Hong Kong's Hang Seng Index slipped 1.1%.

In Australia, shares were rising before the Reserve Bank of Australia cut the cash interest rate to 1.75% (http://www.marketwatch.com/story/reserve-bank-of-australia-cuts-cash-rate-to-175-2016-05-03-0485414), a new record low, from 2%. Pressure had been mounting in recent months for the central bank to slash rates to keep economic growth from slowing.

Japan's stock market was closed Tuesday in observance of a three-day public holiday. It will reopen Friday. The Nikkei Stock Average had tumbled 3.1% Monday on the continued disappointment that the Bank of Japan left interest rates and its easing policies unchanged last week.

In China, markets resumed trading after being closed Monday.

Chinese investors appeared to latch onto President Xi's call late last Friday -- after markets had shut -- to maintain a "healthy development of the stock market," analysts said. Chinese leaders urged "strengthening market supervision and protecting investor interests," according to a statement carried by official media.

"They continue to believe that China will continue to maintain the stock market to become more bullish," says Castor Pang, head of research at Core Pacific-Yamaichi International, a Hong Kong brokerage.

But such optimism could be short-lived, analysts said. Recent economic data continue to underscore the slowing pace of China's economy.

On Sunday, official data showed that China's manufacturing activity grew in April, albeit at a slower pace than in March.

Then on Tuesday, an unofficial gauge indicated that total new orders were sluggish and foreign demand for Chinese goods weakened. The Caixin China general manufacturing purchasing managers' index fell to 49.4 in April compared with 49.7 in March (http://www.marketwatch.com/story/chinas-caixin-manufacturing-pmi-slips-again-2016-05-02). A reading below 50 indicates economic contraction.

The weaker data may lead investors to dial back expectations of further policy easing by China's central bank, analysts said.

"The market is still worried about whether Beijing will continue its easing policy to support growth, which is evidenced by shrinking turnover for the past few weeks," says Zheng Chunming, an analyst at Capital Securities Corp.

Korean shares slipped after data in the morning showed the consumer price index rose 1% in April from the year before as the decline in oil prices capped inflation below the 2% target.

Meanwhile, the Japanese yen hovered at its 18-month high against the U.S. dollar Monday and was recently trading at about Yen106.16 to one dollar in early Asian trading hours.

Brent crude oil prices slid 0.2% to $45.72 per barrel.

(END) Dow Jones Newswires

May 03, 2016 01:17 ET (05:17 GMT)