Asia report: Markets mixed as Japan's factory sector contracts

Mixed performance was seen in stocks across the Asia-Pacific region on Tuesday, as investors watched central bank activity and factory data releases.

In Japan, the Nikkei 225 index fell by 0.21% to 27,473.10, while the Topix declined by 0.11%.

J.Front Retailing, Takashimaya, and Yaskawa Electric Corporation were among the biggest decliners, falling 2.88%, 2.57% and 2.52%, respectively.

Meanwhile in China, the Shanghai Composite rose by 0.49% to 3,306.52, and the Shenzhen Component was up 0.12% at 11,968.60.

Hunan Oil Pump Co jumped 9.98% and Everbright Jiabao was ahead 9.88%, making for the top gainers on the mainland.

Hong Kong's Hang Seng Index was the worst performer of the day, falling by 1.71% to 20,529.49, as technology stocks fell.

JD.com was down 8.53%, Baidu lost 4.76%, and Alibaba was 4.23% weaker.

In South Korea, the Kospi rose 0.16% to 2,458.96, with Galaxia SM and HLB Global among the top decliners as they slid a respective 8.62% and 6.96%.

Australia's S&P/ASX 200 index fell 0.21% to 7,336.30, with Ingenia Communities Group tumbling 13.42% and A2 Milk Company experiencing losses of 6.32%.

The S&P/NZX 50 in New Zealand was down 0.8% at 11,801.49, with EROAD losing 5.68%, and A2 Milk Company also among the biggest decliners on that side of the Tasman Sea, losing 5.43%.

“The market feels like it is in a holding pattern right now as investors await the next meeting of the US Federal Reserve in a month’s time,” said AJ Bell investment director Russ Mould.

“Hints a 50-basis point rate hike could be in the offing have helped sour sentiment a little but confirmation could really undermine investor confidence.

“Asian exchanges were unsteady for the most part amid the weakest PMI reading from Japan’s manufacturing sector in more than two years - hinting at the same pressures on consumer spending and impact of raw material costs as seen in the West.”

Oil prices were mixed, with Brent crude futures falling 0.25% on ICE to $83.86, and the NYMEX quote for West Texas Intermediate rising 0.94% to $77.06.

In currency markets, the yen was 0.33% weaker against the dollar at JPY 134.96, while the Aussie and the Kiwi retreated by a respective 0.38% and 0.27% against the greenback, to AUD 1.4531 and NZD 1.6036.

In economic news, Japan's manufacturing sector fell further into contraction in February, with the au Jibun flash purchasing managers’ index (PMI) falling to 47.4 from 48.9 in January.

The service sector saw stronger growth, however, with a reading of 53.6 compared to the prior month’s 52.3.

PMI readings above the 50-point mark denote expansion, while those below show contraction for a sector.

“The Bank of Japan is likely to retain its view that current easy monetary policy is suitable for Japan’s fragile recovery,” said Duncan Wrigley at Pantheon Macroeconomics.

“The likely next BoJ governor Ueda has said that the current monetary stance is appropriate and that easing measures are necessary, for now.

“We think he will be a data-driven technocrat.”

Wrigley said the current data painted a picture of a “shaky” recovery.

“The vigour in services is narrowly based on tourism, while the near-term outlook for manufacturing is grim.

“Services firms are still shedding workers, based on the PMI, despite rising work backlogs and confidence about future activity.”

Elsewhere, South Korea's trade deficit reduced to $6bn in the first 20 days of this month, with exports to China falling by 22.7%.

“Korean exports are likely to remain weak in the first half, until the global economy improves,” Duncan Wrigley added.

“China’s reopening should provide a partial offset, but the Chinese consumption probably will not fully compensate for soft global consumption demand.”

Down under, Australia's private sector output shrank for a fifth consecutive month, although at its slowest pace since October last year, with a composite PMI from Juno Bank coming in at 49.2 for February, up from January’s 49.2.

Finally, minutes from the Reserve Bank of Australia's February meeting showed that a pause in rate hikes was not an option, with further increases expected in the months ahead to ensure inflation returned to target.

“[The board] agreed that further increases in interest rates are likely to be needed over the months ahead to ensure that inflation returns to target and that the current period of high inflation is only temporary,” the RBA’s minutes read.

Reporting by Josh White for Sharecast.com.