Asia report: Markets mixed as investors eye data, central banks

Asia-Pacific stock markets ended in a mixed state on Thursday, reflecting relative inactivity on Wall Street overnight.

Fresh economic data also played a part, with a steeper-than-expected fall in Australia’s trade surplus further adding to the region’s mixed sentiment.

“Asian equity markets had a mostly subdued performance overnight, influenced by mixed signals from Wall Street,” said TickMill Group market analyst Patrick Munnelly.

"The technology sector underperformed as global yields rose following a surprising rate hike by the Bank of Canada.

“Following the unexpected move by the Reserve Bank of Australia earlier this week, the Bank of Canada surprised the markets with a 25-basis point rate hike - this development prompted investors to revise their expectations for the US Federal Reserve's upcoming policy decisions and become concerned about the overall policy outlook.”

Munnelly said the general consensus suggested that the Fed would implement at least one more rate hike, although the key question remained whether that would be next week, or in July.

“According to the CME FedWatch tool, the probability of a 25-basis point hike by the Fed next week stands at 36%, compared to 22% from the previous day.

“However, the Russell 2000 continued its recent rally, reflecting a rotation into small-cap stocks.”

Most markets marginally weaker after mixed US session

Japan's Nikkei 225 closed down by 0.85% at 31,641.27 points, while the broader Topix index declined by 0.67% to 2,191.50 points.

Notable laggards on Tokyo’s benchmark included Citizen Holdings, down 7.3%, Taiyo Yuden, down 3.4%, and Trend Micro, dropping 3.36%.

Chinese markets saw modest gains, however, with the Shanghai Composite rising 0.49% to 3,213.59, while the Shenzhen Component edged up 0.13% to finish at 10,722.87.

Among the major gainers in Shanghai were Hunan New Wellful, up 10.05%, and Guangdong Dcenti, which added 9.98%.

In Hong Kong, the Hang Seng Index ticked up slightly, finishing 0.25% higher at 19,299.18.

The best performers in the special administrative region included Country Garden Holdings, soaring 10.19%, Trip.com Group, adding 5.14%, and Orient Overseas, gaining 5.01%.

South Korea's Kospi retreated marginally, falling 0.18% to 2,610.85, as major tech player KakaoPay dropped 4.96%, while energy company SK Innovation lost 4.07%.

Australian shares also declined, with the S&P/ASX 200 down 0.26% at 7,099.70, led lower by Reliance Worldwide Corporation and Boral, down 5.83% and 5.74% respectively.

New Zealand's S&P/NZX 50 index also showed a downturn, slipping 0.37% to close at 11,715.74, with Wellington’s biggest fallers including Pacific Edge, down 6.42%, and Restaurant Brands NZ, decreasing 2.66%.

On the currency front, the dollar weakened against the yen, the Aussie and the Kiwi, dropping 0.29%, 0.47%, and 0.57% respectively.

Oil prices saw slight gains, with Brent crude futures last up 0.06% on ICE at $77.00 per barrel, and the NYMEX quote for West Texas Intermediate ahead 0.08% at $72.59.

Japanese economy tops expectations, Australia’s trade surplus falls

In economic news, Japan's economy performed better than anticipated in the first quarter of the year, growing at an annualized rate of 2.7%.

The expansion significantly topped the previously-estimated 1.6%, and also exceeded predictions for 1.9% growth pencilled in by a Reuters poll.

“Domestic demand is likely to continue to drive Japanese growth, while exports are fading, thanks to soft global demand,” said Duncan Wrigley at Pantheon Macroeconomics.

“The domestic recovery is gradually broadening out from tourism-related consumer services to the rest of the economy.

“Both manufacturing and services PMIs now report rising domestic demand, contrasting with pronounced weakness in manufacturing new export orders.”

But elevated consumer inflation was a headwind for consumption spending, Wrigley noted, adding that real wages were continuing to fall.

“We think the BoJ will keep policy settings on hold on 16 June, mindful of the risks of tightening too soon, given the dim global outlook for the second half.”

In contrast, Australia's trade surplus saw a considerable decrease in April, falling to AUD 11.16bn – well below the AUD 14bn economists polled by Reuters were expecting.

Government data showed a 5% drop in total exports, amounting to AUD 56.18bn, following a 4% increase in April.

Goods exports saw a 7% decline, although that was somewhat offset by a 7.8% boost in service exports.

At the same time, imports grew 1.6% from March, reaching AUD 45.02bn, with goods and services imports witnessing an increase of 1.1% and 3.7% on the month, respectively.

In the financial sector, the Reserve Bank of India maintained its key repurchase rate at 6.5% for the second month in a row.

The decision aligned with the unanimous expectations economists surveyed by Reuters.

Reporting by Josh White for Sharecast.com.