China's manufacturing sector cooled further in July, shrinking by one measure, but markets took the news as a sign of a desired slowdown rather than a harbinger of a slump that could derail global recovery.
Manufacturing surveys from other big emerging economies India and Russia, also served to bolster investor sentiment, with Asia's third-largest economy marking its 16th month of expansion and Russia's activity improving for the seventh month.
An HSBC survey showed that Chinese manufacturing activity fell for the first time since March 2009. The index dropped to 49.4 from 50.4 in June, while one compiled by China' statistics bureau fell to a 17-month low of 51.2 from 52.1 in June.
HSBC, however, played down fears that world's prime growth engine, poised to overtake Japan this year as the second-largest economy, might be sputtering.
"We still expect the economy to grow by around 9 per cent in the second half of 2010 and 2011," HSBC said in a note.
India's HSBC Markit Purchasing Managers' Index, however, bounced back in July, driven by new orders and stronger factory output, rising to 57.6 in July from 57.3 in June.
"India is on a roll," said Frederic Neumann, co-head of Asian Economics Research at HSBC.
In Russia, the headline index crept up to 52.7 from 52.6 on the back of rising orders.
South Korea's PMI manufacturing index eased slightly in July, but remained comfortably above the no change threshold.
US manufacturing PMI is expected to drop to 54.1 in July from 56.2 in June.