Asian shares dropped on Tuesday as downbeat data out of China and an absence of affirmative action from Beijing dampened the mood across the region’s trading floors.
A streak of economic data posted on Monday confirmed that growth remained sluggish in the second quarter in the world’s No2 economy forcing economists and analysts to downgrade their expectations for China’s full-year growth.
That negativity fed into Asia’s markets on Tuesday, though Japan’s Nikkei share average still managed to eke out a gain, as advances in bank and chip-related stocks offset the selling driven by declines in Hong Kong and other regional equity markets.
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The Nikkei share average edged up 0.32%, or 102.63 points, to close at 32,493.89, after investors returned from a three-day weekend in Japan. The broader Topix was ahead 0.59%, or 13.18 points, to 2,252.28.
Financials led the gains on the Tokyo Stock Exchange, rallying 2.18% to far outpace any of the other 32 industry sectors.
That followed rallies for US peers in recent sessions, while some also pointed to the tailwind from increased speculation that the Bank of Japan might make a hawkish policy tweak next week.
The Nikkei has been recovering since the middle of last week from a 5.4% retreat after reaching a 33-year closing high of 33,753.33 on July 3.
China and Hong Kong stocks fell, though, after it emerged China’s second-quarter growth had not been as strong as expected.
Morgan Stanley cut China’s 2023 economic growth forecast by 0.7 percentage points to 5% after the weak GDP reading.
The Shanghai Composite Index fell 0.37%, or 11.81 points, to 3,197.82, while the Shenzhen Composite Index on China’s second exchange retreated 0.26%, or 5.33 points, to 2,042.37.
Hong Kong Reopens After Typhoon Talim
In Hong Kong, after the market reopened from an unexpected closure on Monday due to Typhoon Talim, tech shares were down 2.4%, partially reflecting the weak economic data.
Mainland properties traded in Hong Kong lost nearly 6%, on track for the worst single-day performance in seven months, after the world’s most indebted property developer, China Evergrande Group, posted steep losses in its overdue financial results.
The Hang Seng Index slumped 2.05%, or 398.06 points, to 19,015.72.
Elsewhere across the region, in earlier trade, Sydney, Seoul, Singapore, Wellington and Taipei also dropped, though Mumbai, Manila and Jakarta edged higher. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.56%.
Investor focus now swings to the next round of quarterly results this week, with big banks such as Bank of America, Morgan Stanley and Goldman Sachs posting earnings.
Tesla also reports later this week, which will allow the market to take a closer look into how large US corporations are faring, following recent equities rally.
Markets Expecting Another Rate Rise
Investors are waiting for clearer signs that inflation is cooling, with the readings on US retail sales and industrial production to be released later on Tuesday.
Economists reckon retail sales in June will show a 0.5% rise from May, strong enough to keep the soft landing scenario without rekindling worries about inflation.
Money markets have largely priced in a 25-basis-point rate hike from the Fed at its policy meeting later this month, though there are expectations that rates will come down as early as December. Conversely, investors expect the ECB and the Bank of England to extend their rate-hike cycle.
The US dollar index dipped slightly to 99.71 in Asia trade, having struck its lowest since April 2022 on Friday.
Benchmark 10-year notes were flat, with a yield of 3.7989%. US crude rose 0.32% to $74.39 per barrel and Brent was at $78.72, up 0.28%. Spot gold added 0.29% to $1,960.29 an ounce.
Key figures
Tokyo – Nikkei 225 > UP 0.32% at 32,493.89 (close)
Hong Kong – Hang Seng Index < DOWN 2.05% at 19,015.72 (close)
Shanghai – Composite < DOWN 0.37% at 3,197.82 (close)
London – FTSE 100 > UP 0.25% at 7,424.65 (0935 GMT)
New York – Dow > UP 0.22% at 34,585.35 (Monday close)
- Reuters with additional editing by Sean O’Meara
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