Asian stocks saw a mostly positive session on Wednesday as optimism on US inflation lifted the mood on trading floors, though China and Hong Kong suffered following a slump in bank lending.
Soft US producer prices data stirred hopes that this week’s consumer price inflation numbers would be benign, and news that Japanese Prime Minister Fumio Kishida would step down as ruling party leader in September, ending a three-year term marked by rising prices and marred by political scandals, also helped equities.
Japan’s Nikkei share average rose, finishing up 0.58% at 36,442.43 to secure its third consecutive day of gains, while the broader Topix closed 1.11% higher at 2,581.90.
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The Nikkei initially rallied more than 1% after local media reported Japanese PM Kishida will leave his post next month, which he later confirmed in a televised press conference.
Analysts said although the prime minister’s decision to step down could add some uncertainty, the impact should be limited.
The stock market had also tracked overnight gains in Wall Street after US producer prices data buoyed bets for the Federal Reserve to cut interest rates in September.
However, the gains narrowed as investors locked in profits and attention turned to the closely-watched US consumer prices data due later on Wednesday.
Automakers came out as the top performing sector, up 2.8%, led by over 3% gains for Toyota Motor and Honda Motor. Among individual shares, startup investor SoftBank Group rose 1.7% to give the Nikkei the biggest lift.
China’s stock markets saw declines, though, after the release of data showing a more-than-anticipated drop in bank lending in July, highlighting fragile investor sentiment in the world’s No2 economy.
The CSI 300 Index fell by 0.75% and the Shanghai Composite Index dipped by 0.60%, or 17.29 points, to 2,850.65 – its lowest in six months – while the Shenzhen Composite Index on China’s second exchange dropped 0.86%, or 13.43 points, to 1,540.92.
The Hang Seng Index lost 0.35%, or 60.70 points, to end at 17,113.36.
The fall in lending by Chinese banks to 260 billion yuan ($36.28 billion), representing an 88% decrease from June, missed analysts’ expectations.
Seasonal factors and tepid credit demand were cited as key reasons behind the decline, bolstering speculation that the central bank may introduce further easing measures.
Wall Street Rebound
Elsewhere across the region, in earlier trade, there were also gains in Sydney, Seoul, Singapore, Manila, Mumbai, Wellington, Bangkok and Jakarta. MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 0.4%.
European stock futures pointed to a higher open as data showed British inflation rose less than expected in July. Eurostoxx 50 futures extended earlier gains to be up 0.5% and FTSE futures gained 0.6%. US equity futures were flat.
Wall Street had rebounded strongly overnight after data showed US producer prices rose by less than expected in July, suggesting inflation continued to moderate.
That led markets to nudge up the chance of an outsized half-point rate cut from the Federal Reserve in September to 53% from 50% a day earlier, according to the CME FedWatch Tool.
Investors now await all-important consumer price figures for July later in the day where economists look for rises of 0.2% in both the headline and core, with the annual core slowing a tick to 3.2%.
US bonds saw solid buying overnight with two-year yields at 3.9392%, having fallen seven basis points in the offshore session.
Ten-year Treasury yields held at 3.8465% after a drop of 5 bps overnight. The US dollar was dragged lower by falling bond yields. It edged 0.1% up to 102.70 against its major peers, having fallen 0.5% overnight.
In commodities, crude oil recovered some of the previous day’s losses as estimates showed shrinking US crude and gasoline inventories. They had been on a winning streak on concerns about an imminent attack from Iran on Israel.
Brent crude futures rose 0.7% to $81.23 a barrel, while US West Texas Intermediate crude also gained 0.7% to $78.93.
Key figures
Tokyo – Nikkei 225 > UP 0.58% at 36,442.43 (close)
Hong Kong – Hang Seng Index < DOWN 0.35% at 17,113.36 (close)
Shanghai – Composite < DOWN 0.60% at 2,850.65 (close)
London – FTSE 100 > UP 0.41% at 8,269.19 (0930 BST)
New York – Dow > UP 1.04% at 39,765.64 (Tuesday close)
- Reuters with additional editing by Sean O’Meara
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