Asia report: Markets in the red with Japan data in focus

Friday's trading in Asia-Pacific saw a general downward trend, as stock markets closed lower in the wake of fresh economic data.

Japanese inflation and business activity figures had a particular impact, resulting in significant decreases in multiple sectors.

“Asian equity markets struggled to maintain their early positive momentum and stumbled, influenced by the mixed performance seen in the US,” said TickMill’s Patrick Munnelly.

“While the S&P 500 and Nasdaq managed to end their losing streaks, most sectors finished the day in negative territory following a busy day of central bank activity, which included several rate hikes.

“The Nikkei 225 surrendered its initial gains and more as market participants digested mixed inflation data from Japan.”

Munnelly said that although the headline and core consumer price index (CPI) showed a slowdown, the latter and core-core readings were still stronger than expected.

“Additionally, Japan's manufacturing purchasing managers' index (PMI) slipped below the benchmark level of 50.

“The Hang Seng faced pressure upon its return from the Dragon Boat Festival, dragged lower by substantial losses in the healthcare, technology, and property sectors.

“Rising global yields and the closure of Stock Connect trade due to the mainland holiday added to the headwinds affecting sentiment.”

Bourses in the red across the Asia-Pacific region

The Japanese stock market suffered notable losses with the Nikkei 225 declining 1.45% to close at 32,781.54 and the Topix falling 1.38% to 2,264.73.

Some of the largest losses on Tokyo’s benchmark came from IT security company Trend Micro , down 4.85%; trading and investment company Mitsui, off 4.68%; and multinational conglomerate Mitsubishi Corporation, which was 4.38% weaker.

China's financial markets were closed due to the ongoing Dragon Boat Festival holiday.

In Hong Kong, the Hang Seng Index also experienced a decrease, with a drop of 1.71% to close at 18,889.97.

The most significant drops were seen in the shares of Sino Biopharmaceutical, which tumbled 7.24%, while China Resources Land lost 5.08% and Hansoh Pharmaceutical Group was down 4.98%.

South Korea's Kospi slipped 0.91% to 2,570.10, with notable drops in shares from companies such as Hanjinkal, down 5.13%; Lotte, off 4.98%; and Hanon Systems, which was 4.91% weaker.

In Australia, the S&P/ASX 200 was down 1.34% to close at 7,099.20.

Among the largest fallers were Telix Pharmaceuticals, which finished down 5.76%, while Gold Road Resources slid 5.31% and Ingenia Communities Group was 4.77% lower.

New Zealand's S&P/NZX 50 saw minimal movement, ending the day down just 0.01% at 11,737.55.

ANZ Holdings fell by 3.92%, Serko dropped by 3.61%, and Westpac Banking Corporation was down by 3.52%.

In the forex markets, the yen was last 0.1% weaker against the dollar to trade at JPY 143.25.

The Aussie and the Kiwi also fell back from the greenback, with the former last down 0.93% at AUD 1.4939, and the latter retreating 0.7% to change hands at NZD 1.6302.

In energy markets, oil prices decreased, with Brent crude futures last down 1.42% on ICE at $73.09 a barrel, while the NYMEX quite for West Texas Intermediate fell 1.64% to $68.37.

Business activity loses momentum in Japan, inflation in focus

In economic news, Japanese headline inflation saw a dip in May, reaching 3.2% compared to the previous month's 3.5%.

The nation's core inflation rate, which excludes fresh food prices, also witnessed a slight decrease, coming in at 3.2% instead of the 3.4% in April.

Economists polled by Reuters had expected 3.1%, with the data representing the 14th consecutive month the consumer price index had exceeded the Bank of Japan's 2% target.

Business activity in Japan, meanwhile, appeared to be losing steam.

Flash estimates released by au Jibun Bank revealed a dip in the composite purchasing managers index (PMI) for June, dropping to 52.3 from 54.3 in May.

Despite remaining in the expansion zone - indicated by a PMI above 50 -manufacturing activity slipped into contraction with a PMI of 48.4, a notable drop from 50.9 in May.

The services sector continued to expand but at a slower pace, registering a PMI of 54.2 in June versus 55.9 in May.

“The Bank of Japan is likely to view the slippage in the headline manufacturing index as supporting its continued easy monetary policy,” said Duncan Wrigley at Pantheon Macroeconomics.

“Governor Ueda has said that tightening early, rather than late, is the greater risk, after Japan’s long struggle to return to sustained inflation.

“The global outlook for the second half is grim, while the broadening of the domestic recovery is making bumpy progress, at best, especially while real wages are still falling.”

Elsewhere, Singapore's consumer price index grew 5.1% year-on-year in May, falling short of economists' expectations of 5.5% and marking the lowest increase since March 2022.

The figure also represented a decrease from the 5.7% inflation rate in April.

The Monetary Authority of Singapore's core inflation, which excludes accommodation and private transport prices, stood at 4.7%, marking a mild reduction from April's 5%.

Finally, Malaysia's inflation rate dropped to 2.8% in May, marking its third consecutive month of decrease and the eighth reduction in nine months.

Government data identified price increases in the restaurant, hotel, food, and non-alcoholic beverage sectors as the primary drivers of inflation.

However, a slower increase in transport costs partially counterbalanced these factors, preventing a higher inflation rate, according to the country's statistics department.

Reporting by Josh White for Sharecast.com.