Asian stocks and the Australian dollar shot to eight-month highs on Monday after a gauge of China's manufacturing activity offered fresh evidence of a recovery in the world's third-largest economy. Growing optimism that the worst of the global downturn is over offset long-expected news that General Motors Corp (GM.N) will file for bankruptcy later in the day in a government-managed process that will pump another $30 billion in U.S. taxpayers' money into the ailing automaker. U.S. stock futures added to gains as details of the bankruptcy filing emerged with no major downside surprises, while Treasury futures U.S. oil futures rose to the highest since early November at $67 a barrel, as investors shrugged off surprisingly soft South Korean export figures for May and concentrated on the China numbers, which also showed new export orders growing for the first time since June 2008. "We expect manufacturing activity will continue to expand in the coming months, supported by the roll-out of the governments stimulus. Some bright spots have emerged in China's heavy industries," Jing Ulrich, managing director and chairman of China equities at JPMorgan in Hong Kong, said in a note. S&P 500 futures were up 0.6 percent, extending earlier gains made on the Chinese manufacturing report. Hong Kong's Hang Seng index .HSI and China's Shanghai composite .SSEC led Asian equity markets higher, rising 1.5 percent and 2.2 percent, respectively. Japan's Nikkei share average .N225 rose 1.2 percent, with trading houses and industrial sectors performing well. The MSCI index of Asia Pacific stocks outside Japan .MIAPJ0000PUS advanced 1.4 percent to its highest since October 2, having risen 55 percent since a global equity rally began on March 9. The materials and energy sectors outperformed on Monday, as they have since the rally started. News over the weekend that China would raise retail diesel and gasoline prices by 6-7 percent supported shares of domestic refiners, with PetroChina (0857.HK) climbing 3.5 percent. V-SHAPED RECOVERY Optimism about the region as well as continued weakness in the U.S. dollar because of lingering concerns about U.S. fiscal health pushed up emerging Asian currencies across the board. The Australian dollar rose 0.6 percent to US$0.8053, gaining some 16 cents in the last three months. The currency has become a proxy for global growth prospects because of Australia's big commodity exports to China. China's official purchasing managers' index for May fell to 53.1 from 53.5, staying above high water mark of 50, which separates expansion and contraction, for the third month in a row and fueling hopes that China will lead a global recovery.

Source