Asian stocks saw another undramatic day on Wednesday with caution the key word for investors preoccupied with the debt ceiling standoff in the US, poor China data and a muscular dollar.
The greenback hovered around a five-week peak leaving traders across the region risk averse but that put pressure on the yen which in turn boosted Japanese exporters’ fortunes.
That meant Tokyo’s Nikkei share average was the outlier, closing above the key psychological 30,000 level for the first time since September 2021, though it was also buoyed by a strong domestic earnings season.
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The Nikkei ended the day up 0.84% at 30,093.59 after hitting a high of 30,115.32 in the afternoon session.
The benchmark index has now risen between 0.73% and 0.9% in each of the past four sessions, with the start of the streak coinciding with the peak of the reporting season on Friday.
The broader Topix gained by a more modest 0.30% to 2,133.61, but renewed the 33-year peak reached on Tuesday by rising as high as 2,136.39 at the start of afternoon trading.
The Nikkei has climbed more than 3% from Thursday’s close, with its exporter-heavy constituents supported by a revenue-boosting decline of as much as 2.2% in the yen against the dollar.
The domestic earnings season largely wrapped up on Monday and was punctuated by a spate of strong results and several share buybacks during the week-long period.
Daiwa Securities strategist Kenji Abe also noted the strong foreign demand for Japanese equities since April, driven by the Tokyo Stock Exchange’s push for better corporate governance, Warren Buffett’s additional investment in Japanese trading companies, and new Bank of Japan Governor Kazuo Ueda’s dovish stance.
China Growth Forecasts Downgraded
Meanwhile, mainland China and Hong Kong stocks slipped, extending their Tuesday losses following disappointing economic data for April, prompting some economists to downgrade the country’s growth forecasts.
China’s April industrial output and retail sales growth undershot forecasts, suggesting the economy lost momentum at the beginning of the second quarter and intensifying pressure on policymakers to shore up a wobbly post-Covid recovery.
“Beijing may have to introduce a new round of supportive measures in the second half of the year, including cutting benchmark lending rates to bolster growth,” said Ting Lu, chief China economist at Nomura.
The Shanghai Composite Index fell 0.21%, or 6.76 points, to 3,284.23, while the Shenzhen Composite Index on China’s second exchange edged up 0.33%, or 6.57 points, to 2,025.95.
Most sectors in Hong Kong fell, though Alibaba Group Holding Ltd and Baidu Inc rose 1.4% and 1.5%, respectively.
Search engine giant Baidu beat first-quarter revenue and profit estimates on Tuesday as businesses spent more on advertising amid China’s post-Covid reopening. Alibaba is expected to report a rise in quarterly revenue when it reports results on Thursday.
The Hang Seng Index dropped to a 12-week low of 2.09%, or 417.68 points, to 19,560.57, while the China Enterprises Index dropped 2.25%
Elsewhere across the region, in afternoon trade, Sydney, Singapore, Mumbai, Bangkok and Wellington fell, though Seoul, Taipei, Manila and Jakarta edged up.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.09% in choppy trading.
Biden, McCarthy Debt Ceiling Talks
Democratic President Joe Biden and top congressional Republican Kevin McCarthy have edged closer to a deal to avoid a looming US debt default on Tuesday.
Without an agreement, in about two weeks, the government might not be able to pay its bills, with economists fearing the country would likely slide into a recession.
Futures indicated European stocks were set for a lower open, with Eurostoxx 50 futures down 0.14%, German DAX futures down 0.02% and FTSE futures down 0.17%.
US stocks indexes closed down overnight, hamstrung by dour forecast from Home Depot and mixed April US retail sales data.
Recent economic data indicates slowing in the US economy following a string of rate hikes by the Federal Reserve to fight high inflation. Markets are pricing the Fed to cut rates towards the end of the year, according to CME FedWatch tool, but some Fed officials have stuck to a hawkish rhetoric.
The offshore yuan weakened past 7 per dollar for the first time in five months and the yen weakened 0.12% to 136.55 per dollar, not far from a two-week low of 136.69 touched on Tuesday.
Against a basket of currencies, the dollar rose 0.01% to 102.61, inching closer to the five-week high of 102.75 it touched on Monday.
US crude rose 0.06% to $70.90 per barrel and Brent was at $74.99, up 0.11% on the day.
Gold prices held steady after retreating from the key $2,000-an-ounce mark in the previous session. Spot gold was last at $1,991.29 an ounce.
Key figures
Tokyo – Nikkei 225 > UP 0.84% at 30,093.59 (close)
Hong Kong – Hang Seng Index < DOWN 2.09% at 19,560.57 (close)
Shanghai – Composite < DOWN 0.21% at 3,284.23 (close)
London – FTSE 100 > UP 0.02% at 7,752.79 (0936 GMT)
New York – Dow < DOWN 1.01% at 33,012.14 (Tuesday close)
- Reuters with additional editing by Sean O’Meara
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