Asia’s major stock markets were, for the most part, on the front foot on Monday, with hopes of a China recovery boosting investor mood, though there was still an air of caution with worries over more central bank tightening persisting.
The outlier was Japan, where shares ended lower as investors sold stocks as the yen strengthened against the dollar, and concerns surrounding the US banking sector continued.
The Nikkei index fell 0.71% to 28,949.88, closing below the 29,000-mark for the first time since April 28.
The index hit its highest level since January 2022 last Tuesday before the market closed for a three-day holiday for the Golden Week break. The broader Topix slid 0.21% to 2,071.21.
Also on AF: EU Plans Sanctions on 7 Chinese Firms Aiding Russia’s War – FT
The yen gained against the dollar at the very end of last week after the US Federal Reserve hinted at a pause in its monetary tightening cycle. A stronger yen tends to push exporter shares lower as it decreases the value of overseas profits in yen terms when firms repatriate them to Japan.
Oil explorers lost 1.71% to become the worst performers among the Tokyo Stock Exchange’s 33 industry sub-indexes, followed by banks, which fell 1.27%.
Trading houses rose after Warren Buffet said on Saturday he is more comfortable with Berkshire Hathaway deploying capital in Japan than Taiwan, reflecting the growing tensions between the United States and China.
The billionaire investor recently increased investments in five Japanese trading houses, including Itochu Corp and Marubeni Corp.
Meanwhile, China and Hong Kong stocks rose on Monday, as banks and energy shares climbed on hopes that a rebound in the country’s services consumption would benefit those sectors.
Household consumption per capita rose 5.4% in Q1, compared with a year ago, up from 2.4% year-on-year increase in Q4, according to a Goldman Sachs report, led by a strong services rebound.
Shanghai-listed Banks Rally
The Shanghai Composite Index rallied 1.81%, or 60.50 points, to 3,395.00, while the Shenzhen Composite Index on China’s second exchange edged up 0.44%, or 9.06 points, to 2,046.92.
Shanghai-listed state-owned banks such as Industrial and Commercial Bank of China was up 6%, and the Agricultural Bank of China rose 5.8%
The Hang Seng Index gained 1.24%, or 247.72 points, to close at 20,297.03 and the Hang Seng China Enterprises Index rose 0.92%.
HSBC shares rose 1.37%, the highest in two months. On Friday, it defeated a proposal backed by its biggest Asian shareholder Ping An to break-up the bank and spin-out its lucrative Asian business at its annual investor meeting in Birmingham in England.
Elsewhere across the region, Sydney, Seoul, Mumbai, Taipei, Manila and Jakarta were all in the green in early trade. MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.7%.
Strong US Payrolls Report
Globally, investors were braced for a week where US inflation data will test wagers the next move in interest rates will be down, while worries about a possible credit crunch weighed on the dollar.
Friday’s robust US payrolls report has already delivered a setback to easing hopes and any upside surprise on consumer prices would challenge bets for a rate cut as soon as September.
Forecasts are for a rise of 0.4% in April for both the headline and core CPI, with the annual pace of core inflation slowing just a tick to 5.5%.
Later on Monday, the Federal Reserve’s survey of loan officers will draw an unusual amount of attention as markets seek to gauge the impact of regional banking stress on lending.
“The survey should point to further broad-based tightening in bank lending standards,” said Bruce Kasman, head of economic research at JPMorgan.
“Continued stress in the banking system does, of course, increase concern that a disruptive financial market event is on the horizon,” he added.
Eurostoxx 50 futures added 0.1%, while FTSE futures were closed for a holiday. S&P 500 futures and Nasdaq futures were both little changed, after jumping on Friday in the wake of Apple’s upbeat results.
ECB Rate Rise Plan
Bond markets were still stinging from the strong payrolls report with US two-year yields up at 3.93% after briefly getting as low at 3.657% last week.
Not helping has been the risk of a US government default with US Treasury Secretary Janet Yellen on Sunday warning of a possible crisis should Congress not raise the debt ceiling.
The market is still pricing in at least one more hike from the European Central Bank, while the Bank of England is widely expected to lift its rates by a quarter point on Thursday.
The dollar has fared better on the yen as the Bank of Japan remains the only central bank in the developed world to not have tightened policy. The dollar stood at 134.80 yen, with the euro at 148.75 and not far from its recent 15-year peak of 151.55.
Oil prices have been going the other way as fears of a global economic slowdown eclipsed planned output cuts to see US crude shed more than 7% last week.
Brent was last up 40 cents at $75.70 a barrel, while US crude added 42 cents to $71.76 per barrel.
Key figures
Tokyo – Nikkei 225 < DOWN 0.71% at 28,949.88 (close)
Hong Kong – Hang Seng Index > UP 1.24% at 20,297.03 (close)
Shanghai – Composite > UP 1.81% at 3,395.00 (close)
London – FTSE 100 <> CLOSED
New York – Dow > UP 1.65% at 33,674.38 (Friday close)
- Reuters with additional editing by Sean O’Meara
Read more:
Warren Buffett Says He Prefers Investing in Japan to Taiwan
HSBC Defeats Asia Spin-Off Proposal by ‘Overwhelming Majority’
