Asia report: Most markets weaker as debt ceiling talks disappoint

Asia’s financial markets largely closed in the red on Tuesday, as concerns over unsuccessful US debt ceiling talks overpowered investor sentiment.

The stalled discussions between US President Joe Biden and Republican House Speaker Kevin McCarthy added to uncertainty overnight.

Although McCarthy described the recent meeting as the most "productive" and "professional" so far, the lack of a conclusive agreement spurred disappointment across global markets.

“Asian equities traded with uncertainty as investors assessed the latest updates on the debt limit negotiations,” said Patrick Munnelly, market analyst at TickMill Group.

“While the meeting between Biden and McCarthy was described as productive, there were no significant breakthroughs.

“The Nikkei 225 initially climbed to its highest level since August 1990, and seemed poised to match its longest winning streak in four years.”

However, it eventually declined during afternoon trade, Munnelly noted, as profit taking emerged.

“The Hang Seng and Shanghai Composite both experienced subdued performance - Hong Kong failed to sustain the early tech-led momentum from China's approval of 86 domestic online games in May.

“Meanwhile, the mainland market faced pressure after Chinese press reports indicated expectations that the People's Bank of China (PBoC) would keep its benchmark lending rates unchanged for the foreseeable future.

“Additionally, the US denied any plans to lift sanctions on China's defence minister, contributing to the cautious sentiment in the market.”

Most markets weaker on debt ceiling disappointment

In Japan, the Nikkei 225 fell 0.42% to close at 30,957.77, while the Topix ended 0.66% lower at 2,161.49.

Notable decliners on Tokyo’s benchmark included Toyota Motor, dropping by 4.77%, and J.Front Retailing, down by 3.25%.

China's major indices also closed lower, with the Shanghai Composite down 1.52% at 3,246.24, and the Shenzhen Component declining 1.03% to 11,012.58.

On the Shanghai bourse, GuangDong Super Telecom saw a substantial decrease of 10.01%, while Deluxe Family reported an 8.61% drop.

The Hang Seng Index in Hong Kong dropped 1.25% to 19,431.25, with SMIC, China Hongqiao, and Country Garden Holdings seeing declines of 6.41%, 3.93%, and 3.75%, respectively.

South Korea's Kospi was one of the few indices that closed higher, gaining 0.41% to end at 2,567.55.

DB Insurance and Posco Future M stood out with gains of 4.33% and 3.09%.

Australia's S&P/ASX 200 marginally fell by 0.05% to 7,259.00, with Sayona Mining and Perseus Mining among the biggest losers, down by 6.38% and 3% respectively.

Across the Tasman Sea, New Zealand’s S&P/NZX 50 index lost 0.41% to 11,944.20, with declines in the shares of Scales Corporation and KMD Brands of 2.7% and 2.63%.

In currency markets, the yen was last 0.06% stronger on the dollar at JPY 138.52.

The Aussie, meanwhile, was last 0.45% weaker on the greenback at AUD 1.51, while the Kiwi retreated 0.51% to change hands at NZD 1.5987.

On the energy front, oil prices were in the green with Brent crude futures last up 0.51% on ICE at $76.38 per barrel, and the NYMEX quote for West Texas Intermediate rising 0.6% to $72.48.

Japan manufacturing sector grows for first time in seven months

In economic news, for the first time in seven months Japan's manufacturing sector reported growth, according to preliminary data from au Jibun Bank.

The bank's manufacturing purchasing managers’ index (PMI) came in at 50.8 for May - a significant shift from April's 49.5.

It indicated the first enhancement in operating conditions since October last year, standing above the 50-point level that separates expansion from contraction.

An increase in both production and new orders, at the highest rate for over a year, were contributing factors.

Additionally, supply chain complications looked to be receding.

Japan's services PMI meanwhile also showed robust expansion at 56.3 - the highest level since records began.

The overall composite PMI escalated to 54.9, from April's 52.9.

“The Bank of Japan will be encouraged by the signs of recovery in manufacturing activity, driven by domestic demand, as well as evidence that the cost-push inflation is beginning to run its course,” said Duncan Wrigley at Pantheon Macroeconomics.

“But the recovery is nascent and the Bank is unlikely to make a significant policy change soon.”

Wrigley noted that the headline manufacturing PMI was above 50 for almost two years in 2021 to 2022, without a policy change.

“Governor Kazuo Ueda recently said that he sees a greater risk in tightening too early and killing off the nascent recovery, rather than tightening too late and letting inflation overshoot.”

Elsewhere, inflation in Hong Kong rose 2.1% year-on-year in April, outpacing the anticipated 2% and the previous month's 1.7%.

The city’s administration attributed that to escalating prices of energy-related commodities, as well as clothing and footwear.

In South Korea, consumer sentiment soared to an annual high in May, reaching 98 from the previous month's 95.1, according to the Bank of Korea.

Meanwhile, Singapore’s headline inflation rate for April saw a significant rise of 5.7%, outstripping March's 5.5% and expectations for 5.5%.

The growth was driven by a surge in services and private transport costs, according to the Monetary Authority of Singapore (MAS).

It said the core inflation measure, which excludes housing and private transport, remained steady at 5% in April.

MAS was anticipating a high core inflation rate in the coming months, before tapering off in the latter half of 2023 due to falling imported inflation and an easing domestic labour market.

Finally, a poll of economists was expecting the Reserve Bank of New Zealand (RBNZ) to increase its official cash rate to 5.5% in its Wednesday announcement.

A majority of the economists surveyed by Reuters predicted a rate hike, which would be the 12th since October 2021.

The RBNZ surprised markets with a 50-basis point increase to 5.25% in March, against an expected 25 basis points.

Reporting by Josh White for Sharecast.com.

NIKKEI 225 -129.05 (-0.42%) 30,957.77

RISERS
Nippon Paper Industries +15% JPY 1,273.0
Trend Micro +2.94% JPY 6,650.0
Japan Steel Works +2.91% JPY 2,830.0
JGC Corporation +2.63% JPY 1,718.0
Recruit Holdings +2.56% JPY 4,527.0

FALLERS
Toyota Motor -4.77% JPY 1,857.0
J.Front Retailing -3.25% JPY 1,427.0
Kobe Steel -2.82% JPY 1,070.0
Rakuten -2.77% JPY 596.0
Yaskawa Electric Corporation -2.74% JPY 5,680.0

SHANGHAI COMPOSITE -50.23 (-1.52%) 3,246.24

RISERS
Fujian Raynen Tech +9.97% CNY 16.21
Guangxi Guidong Electric Power +9.92% CNY 3.99
Flat Glass Group +5.9% CNY 32.68
Flower King Eco-Engineering +4.96% CNY 4.66
Harson Trading China +4.91% CNY 7.69

FALLERS
GuangDong Super Telecom -10.01% CNY 34.99
Deluxe Family -8.61% CNY 3.29
CSSC Steel Structure Engineering -7.78% CNY 21.94
China TV Media -7.28% CNY 14.13
Huadian Power A -6.37% CNY 6.03

HANG SENG INDEX -246.92 (-1.25%) 19,431.25

RISERS
Hansoh Pharmaceutical Group +4.72% HKD 13.76
Xinyi Solar +2.01% HKD 8.11
Wharf Real Estate +1.49% HKD 40.95
China Resources Mixc +1.09% HKD 37.10
WiXi Biologics +0.67% HKD 44.85

FALLERS
SMIC -6.41% HKD 19.70
China Hongqiao -3.93% HKD 6.11
Country Garden Holdings -3.75% HKD 1.54
Zhongsheng -3.65% HKD 31.70
NetEase -3.57% HKD 135.00

KOSPI 100 +6.58 (+0.26%) 2,540.45

RISERS
DB Insurance +4.33% KRW 79,600
Posco Future M +3.09% KRW 333,500
LG Chemicals +2.71% KRW 719,000
LG Energy Solution +2.5% KRW 574,000
Posco Holdings +2.17% KRW 377,000

FALLERS
Naver Corporation -1.4% KRW 212,000
CJ Cheiljedang -1.22% KRW 324,500
SK Square -1.11% KRW 44,700
Hyundai Engineering & Construction -1.11% KRW 40,200
LG Display -1% KRW 15,780

S&P/ASX 200 -3.4 (-0.05%) 7,259.90

RISERS
Contact Energy +5.89% AUD 7.55
Paladin Energy +5.3% AUD 0.695
Block Inc +4.49% AUD 91.95
New Hope Corporation +3.5% AUD 5.33
Tabcorp Holdings +3.2% AUD 1.13

FALLERS
Sayona Mining -6.38% AUD 0.22
Perseus Mining -3% AUD 1.94
Sonic Healthcare -2.98% AUD 35.17
Sims -2.68% AUD 14.51
Zimplats Holdings -2.48% AUD 24.38

S&P/NZX 50 -48.8 (-0.41%) 11,944.20

RISERS
Eroad +9.43% NZD 0.58
Oceania Healthcare +3.95% NZD 0.79
Pacific Edge +3.26% NZD 0.475
Sky Network Television +2% NZD 2.55
Infratil +1.85% NZD 9.63

FALLERS
Scales Corporation -2.7% NZD 3.24
KMD Brands -2.63% NZD 1.11
Fisher & Paykel Healthcare -2.43% NZD 25.66
Fonterra Shareholders Fund -2.24% NZD 3.49
Skellerup -2.06% NZD 4.75