Asian Stocks Mixed as Markets Await US Inflation Data

Asian equities squeezed higher on Wednesday from near two-year lows and Wall Street futures also gained before the release of the keenly awaited data which analysts say could show inflationary pressures in the world’s biggest economy are peaking.

China stocks closed higher as investors took comfort in signs of lower domestic Covid-19 infections, while US President Joe Biden’s decision to consider eliminating Trump-era tariffs on Beijing further lifted risk appetite.

The blue-chip CSI300 index ended 1.4% higher at 3,976.42, while the Shanghai Composite Index gained 0.8% to 3,058.70 points. Meanwhile, the Hang Seng rose by close to 1% in Hong Kong after climbing 190.88 points to 19,824.57.

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Shanghai officials said on Wednesday half the city had achieved “zero-Covid” status, but uncompromising restrictions had to remain in place under a national policy. Meanwhile, new cases detected in Beijing dropped to the lowest level since April 26.

Lifting market sentiment further, China’s producer prices rose at the slowest pace in a year in April, despite the surge in global commodity costs, leaving room for more stimulus to shore up the flagging economy.

Risks affecting China’s onshore market are controllable, and the market has solid foundation for stable operation, the official CCTV reported on Tuesday, citing a securities regulatory official.

Biden, under pressure to tame high inflation, said he was considering eliminating Trump-era tariffs on China as a way to lower prices for goods in the United States.

China equities could be approaching the late stage of a bear market, but the potential final leg is likely to be bumpy, Morgan Stanley strategists said in a note. The bank expected near-term market volatility to remain elevated, citing China’s Covid-19 situation, geopolitical tensions, global macro slowdown, and monetary tightening.

New energy firms jumped more than 4% to lead the gains, with battery giant CATL up more than 8%. Semiconductors and machinery stocks also went up more than 3% each.

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Nikkei Edges Up

Japan’s Nikkei index ended higher as investors scooped up companies with an upbeat outlook, although gains were capped by concerns around US consumer data due later in the day.

The Nikkei share average edged up 0.18% to close at 26,213.64, after trading in negative territory earlier in the session.

“Investors tried to look for stocks that had positive outlook,” said Shoichi Arisawa, general manager of the investment research department at IwaiCosmo Securities. “Still, it was hard to make active bets before confirmation whether the US consumer prices have peaked out or not.”

The broader Topix fell 0.60% to 1,851.15, dragged down by Toyota Motor, which fell 4.43% after flagging profit declines.

During the market hours, Toyota warned that operating earnings this year could slump by a fifth “due to unprecedented increases in materials and logistics costs,” on the back of a 33% slide in fourth-quarter profit.

Sony Group rose 2.1% after the camera and auto equipment maker announced that its fourth-quarter operating profit more than doubled from a year ago.

Markets Mixed Elsewhere

Markets were mixed in other regional centres – up in Sydney, Kuala Lumpur and Jakarta, but slightly lower in Seoul, Singapore, Bangkok and Manila.

Australian shares inched up as gains in mining and healthcare stocks helped offset losses in banks. The S&P/ASX 200 index ended up 0.2% at 7,064.70, paring back some of its earlier losses.

In Seoul, the KOSPI closed down 4.29 points, or 0.17%, to 2,592.27, after falling as much as 0.67%, continuing their longest losing streak in nine months, although losses were limited by Chinese stocks’ sharp rise.

“It’s an unanchored market (globally) where people don’t know where (yields) are going to. The growth side is coming more and more to the fore in terms of market concerns,” said Charles Diebel, head of fixed income at Mediolanum International Funds.

“If inflation continues to print higher and higher the market will continue to sell off. Intuitively inflation cannot keep going up as base effects will unwind at some point but are we are that price yet?” he added.

Indian Shares Slip

Indian shares were also down to their lowest in two months, extending losses for a fourth straight session as oil prices rose.

The NSE Nifty 50 index fell 0.45% at 16,167.10 at the close, while the S&P BSE Sensex slid 0.51% to 54,088.39.

“Rise in oil prices is one of the reasons (for fall in equities) given India’s vulnerability, but I mostly think it is in anticipation of inflation print that is going to come for US and India,” Yesha Shah, head of equity research at Samco Securities, said.

The MSCI benchmark for global stocks rose 0.2% by 0822 GMT after sliding on Tuesday to its lowest level since November 2020 on fears Fed tightening could significantly slow down the global economy. The index is down 17% so far this year.

The pan-European STOXX 600 index rose 0.7%, while US equity futures rose.

Oil bounced back after plunging nearly 10% over the previous two sessions, buoyed by supply concerns as the European Union works on gaining support for a ban on Russian oil and as major producers warned they may struggle to fill the gap when demand improves.