Asian stocks started the new financial year with broad gains on Monday, with the exception of Japan’s Nikkei, which continued its retreat from life-highs amid concerns over a steady slump in the yen.
Chinese stocks led the gains in Asian bourses after data from Beijing on Sunday showed the country’s factory activity expanded in March for the first time in six months.
Those findings were further reinforced on Monday after survey by Caixin/S&P Global showed the the country’s manufacturing activity expanded at the fastest pace in 13 months in March.
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Optimism on the back of that data drove a rally in mainland Chinese blue chip CSI 300 Index, which closed 1.6% higher. The benchmark Shanghai Composite also saw gains of more than 1%.
The upbeat data also fuelled a rally in Indian stocks with benchmark indexes Nifty 50 and BSE Sensex clocking record highs. Upmoves in both indexes after three weeks of consolidation indicate the positive momentum may sustain ahead of the upcoming earnings season, analysts said.
Expectations of an easier US monetary policy also boosted investor sentiment across Asia after inflation data from the Federal Reserve indicated on Friday that price pressures are further easing.
Stock futures in the US also pointed firmly up amid increasing bets for a June interest rate cut.
“Tamed” US inflation “may offer some validation for the Fed to kickstart its rate-cutting process sooner rather than later,” said Yeap Jun Rong, a market analyst at IG.
“With Wall Street eyeing another run for a new record high, that may keep the broader risk-on sentiments going.”
Markets in Singapore, Seoul, Bangkok and Manila all closed in the green, while Taipei and Jakarta closed in red. Hong Kong and Australia remained closed for Easter holidays, meanwhile.
Nikkei, yen in rough seas
Amid all the investor optimism, however, Japan’s Nikkei remained the biggest outlier as swift declines in the yen kept traders on guard for a currency intervention.
The Nikkei index tumbled 1.4% as of the close, as investors worried about possible yen-buying from the Bank of Japan that would hurt exporter profit outlooks and returns for foreign investors.
The yen remains pinned near a 34-year low against the dollar, fetching 151.315 per greenback early on Monday. The Japanese currency has been on a downtrend despite the BOJ’s decision on March 19 to end eight years of negative interest rates.
Japanese Finance Minister Shunichi Suzuki said there were some speculative moves in the currency market which did not reflect economic fundamentals. He reiterated that the Japanese central bank “will respond appropriately” against excessive yen declines.
“We will watch currency market developments with a strong sense of urgency,” Suzuki told parliament.
Upbeat global cues
A corporate survey showing a worsening mood among big manufacturers gave investors another reason to sell stocks on the first day of Japan’s new fiscal year.
Analysts say investors took the opportunity to book profits with the Nikkei still close to the record peak reached just over a week ago.
The slump in Nikkei comes after the index logged its biggest ever rise on an absolute basis for the fiscal year ended on Friday, rallying 12,328 points.
Despite the current overall pressure on the index, analysts are largely upbeat about the global market outlook.
“Markets may have more upside, but don’t expect a straight-line ascent,” said Vasu Menon, managing director for investment strategy at OCBC.
“Once the US central bank has gained an upper hand over inflation and tamed it decidedly, markets may even be poised for a multi-year rally.”
Gold at all-time high, crude firm
Elsewhere, the dollar index, which measures the US currency against six rivals including the yen, edged 0.05% higher to 104.53, hovering close to the six-week high of 104.73 it touched last week.
The euro was flat at $1.078675, and sterling was steady at $1.2625.
Leading cryptocurrency bitcoin was little changed at $69,410, and has traded mostly sideways for the past week.
Spot gold was up 1.2% at $2,258.12 per ounce, after hitting an all-time high of $2,265.49 earlier in the session amid Fed rate-cut expectations.
Crude oil remained firm amid a tighter supply-demand picture, with China’s economy improving and expectations of OPEC+ output cuts. Brent crude rose 29 cents, or 0.3%, to $87.29 a barrel after rising 2.4% last week.
Key figures
Tokyo – Nikkei 225 < DOWN 1.4% at 39,803.09 (close)
Hong Kong – Hang Seng Index <> CLOSED
Shanghai – Composite > UP 1.2% at 3,077.38 (close)
London – FTSE 100 <> CLOSED
New York – Dow > UP 0.12% at 39,807.37 (Thursday close)
- Reuters, with additional editing by Vishakha Saxena
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