Asia report: Equities rise, China manufacturing growth slows

Equity markets were mostly higher at the start of a quiet week in Asia on Monday, with some bourses closed and others taking an early finish ahead of the Lunar New Year holiday.

In Japan, the Nikkei 225 was up 1.07% at 27,001.98, as the yen weakened 0.2% against the dollar to last trade at JPY 115.49.

Technology conglomerate SoftBank Group jumped 4.5%, while among the benchmark’s other major components, automation specialist Fanuc was down 0.93% and fashion firm Fast Retailing lost 1.62%.

The broader Topix index was ahead 1.01% by the end of trading in Tokyo, ending the session at 1,895.93.

Markets in mainland China were closed for the Lunar New Year’s Eve holiday, as were those in South Korea.

Official data released over the weekend showed growth in China’s industrial activity slowing in January, with the official manufacturing purchasing managers’ index (PMI) coming in at 50.1 for the month.

That was down from December’s reading of 50.3, and was only just above the 50-point level that separates expansion from contraction.

The unofficial Caixin/Markit manufacturing PMI, meanwhile, slipped into contraction territory, coming in at 49.1 for the first month of 2021.

Beijing’s official industrial gauge is generally taken to reflect large, state-affiliated manufacturing, while the Caixin measure is more reflective of smaller, market-driven industrial activity.

The Hang Seng Index in Hong Kong was 1.07% higher by the end of its half-day session, closing at 23,802.26.

“While there are no ground-breaking announcements expected from the Federal Reserve this week on tightening, the spectre of interest rate rises is likely to loom. Investors are currently grappling with valuation metrics following a strong run over recent years for the main indices, with higher rates not only increasing borrowing costs for companies but also discounting the value of future profits,” said Interactive Investor head of markets Richard Hunter of the global situation on Monday morning.

“At the same time, the latest non-farm payrolls report at the end of the week is expected to show a weaker reading given the rise of the variant in December and a bout of adverse weather, with the current forecast being that around 150,000 jobs will have been added.”

Hunter said geopolitical tensions were also adding to existing concerns on tight supply, lifting oil prices further.

“With Omicron variant numbers expected to continue their present decline, there is also an expectation for higher demand as traffic recovers in Europe and as the US shows a similar bounce, with gasoline demand now reportedly just 4% shy of 2019 levels.”

Oil prices continued to climb at the end of the Asian day, with Brent crude last up 0.86% at $90.80 per barrel, and West Texas Intermediate ahead 0.68% at $87.41.

In Australia, the S&P/ASX 200 was off 0.24% at 6,971.60, while across the Tasman Sea, New Zealand’s S&P/NZX 50 managed gains of 0.31% to 11,889.40, although its largest city of Auckland was off for a provincial holiday.

The down under dollars were both stronger on the greenback, with the Aussie last ahead 0.85% at AUD 1.4184, and the Kiwi advancing 0.51% to NZD 1.5203.