Asia’s major stock indexes had a mixed day on Wednesday with investors reacting to China’s gloomy outlook, dovish central banks and positive inflation news.
Shares went in different directions as China growth concerns weighed while elsewhere British inflation came in surprisingly soft for once and US data stoked hopes the world’s biggest economy can avoid recession.
Going in an upward direction was Japan’s Nikkei share average which scaled a two-week peak, lifted by a rally on Wall Street and hopeful comments from the country’s central bank chief.
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The Nikkei powered higher in the final half hour of trade to end the day up 1.24% at 32,896.03, the session’s high. The broader Topix rose 1.19% to 2,278.97.
Overnight, the Dow rallied more than 1%, marking its seventh straight winning session amid solid bank earnings and optimism that the economy is on course for a soft landing.
Meanwhile, Bank of Japan Governor Kazuo Ueda signalled his resolve to maintain an ultra-loose monetary policy for the time being, saying there was still some distance to sustainably achieving the central bank’s 2% inflation target.
The BOJ will set policy on July 28 and speculation had been building in the market for a hawkish policy tweak after some strong wage data earlier this month.
The Nikkei has been recovering over the past week after pulling back sharply from a 33-year closing high of 33,753.33 on July 3. It had rallied nearly 27% since mid-March to reach that point.
China Fiscal Revenues Growth Slows
Mainland China stocks scratched out some gains while Hong Kong shares extended their losses, with more frail economic data continuing to weigh on sentiment as investors wait for meaningful stimulus as the next catalyst.
China’s fiscal revenues grew 13.3% in the first six months of 2023 from a year earlier, slower than a 14.9% rise in the first five months, finance ministry data showed.
The Shanghai Composite Index rose 0.03%, or 1.02 points, to 3,198.84, while the Shenzhen Composite Index on China’s second exchange edged back 0.26%, or 5.29 points, to 2,037.08.
Yet, some sell-side analysts are more positive. Hong Kong stocks’ valuations are still well below their five-year averages while the outlook for earnings growth in 2023 is good, HSBC analysts said in a note, expecting a turnaround of Hang Seng index in the second half of the year.
The Hang Seng Index dropped 0.33%, or 63.41 points, to 18,952.31, while the Hang Seng China Enterprises Index fell 0.28%.
Elsewhere across the region, Sydney, Singapore, Mumbai, Wellington, Taipei and Manila were all in the green but Seoul was down.
UK Headline Inflation Drops
Globally, the big news was in the UK where the headline CPI fell to 7.9% year-on-year in June, against expectations for 8.2%. Core inflation fell to 6.9% from a three-decade peak of 7.1%. Sterling dropped 0.6% to $1.2962 and FTSE futures rose 0.5%.
Headline US retail sales data came in below forecasts but core sales which exclude food, fuel and building materials, rose a solid 0.6% in June and had economists lifting gross domestic product (GDP) forecasts.
The Atlanta Fed’s influential GDP Now tracker has the US economy growing an annualised 2.4% in the second quarter, slightly higher than its prediction of 2.3% a week earlier. Big US bank shares rose sharply on strong results.
As well as slipping on the dollar, sterling slipped 0.6% to an 18-month low of 86.66 pence to the euro.
Benchmark 10-year US Treasuries yields were 2 basis points lower at 3.7717%.
The yen slipped to a one-week low of 139.43 per dollar and Japanese government bonds rallied following the Bank of Japan’s governor sticking to his script that policy shifts are still some time away.
Brent crude oil futures were steady at $79.42 a barrel after gaining on Tuesday. Gold held gains made as yields fell and bought $1,975 an ounce.
Key figures
Tokyo – Nikkei 225 > UP 1.24% at 32,896.03 (close)
Hong Kong – Hang Seng Index < DOWN 0.33% at 18,952.31 (close)
Shanghai – Composite > UP 0.03% at 3,198.84 (close)
London – FTSE 100 > UP 1.36% at 7,555.42 (0936 GMT)
New York – Dow > UP 1.06% at 34,951.93 (Tuesday close)
- Reuters with additional editing by Sean O’Meara
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