Asia report: Stocks fall as Japan's core inflation remains steady

Stock markets in the Asia-Pacific region close mostly lower on Friday, with China's equities leading the fallers.

Negative sentiment abounded after a weak performance on Wall Street overnight, compounded by the latest core inflation data out of Japan, which showed little change in price growth.

“A mixed bag of earnings stateside left investors somewhat subdued,” said TickMill Group market analyst Patrick Munnelly.

“Coupled with soft US data and another round of hawkish Fed rhetoric there was little to inspire risk appetite.

“Asian equity markets followed suit, with most regional bourses trading in the red.”

Munnelly said the Shanghai Composite was the standout underperformer, as US-China relations came into focus with US Treasury secretary Janet Yellen suggesting they could be jeopardised by national security interests.

“This souring of mood was compounded as US President [Joe] Biden threatened to announce further China investment restrictions.

“China countered the reports with Chinese Foreign Minister Gang commenting that the entire Taiwan Strait belongs to China, and that those who play with fire eventually get burnt.”

Most markets finish the week with a negative session

In Japan, the Nikkei 225 lost 0.33% to close at 28,564.37, while the Topix index fell 0.23% to 2,035.06.

Major components on Tokyo’s benchmark Nissan Motor, Rakuten, and Mazda Motor saw their shares decline by 3.38%, 3.2%, and 2.41%, respectively.

China's Shanghai Composite index closed 1.95% lower at 3,301.26, while the Shenzhen Component fell 2.28% to 11,450.44.

Guangzhou Fangbang Electronics and Inesa Intelligent Tech saw their shares plummet by 11.8% and 9.97%, respectively.

Hong Kong's Hang Seng Index fell 1.57% to 20,075.73, with SMIC, China Hongqiao, and Country Garden Services among the biggest losers, seeing their shares decline by 9.18%, 4.92%, and 4.61%, respectively.

South Korea's Kospi index closed 0.73% lower at 2,544.40, with Amore Group and Amorepacific among the biggest losers, losing 10.43% and 8.53% of their share value.

In Australia, the S&P/ASX 200 index closed 0.43% lower at 7,330.40, with Bank of Queensland and Infratil among the leading fallers, losing 5.03% and 4.7% of their share value, respectively.

New Zealand's S&P/NZX 50 index bucked the regional trend, rising 0.4% to 11,927.50, with Pacific Edge and Eroad among the biggest gainers, adding 5.43% and 5.26% to their share value.

In currency markets, the yen was last 0.28% stronger on the dollar to trade at JPY 133.87, while the Aussie weakened 0.79% to AUD 1.4947, and the Kiwi retreated 0.62% from the greenback to change hands at NZD 1.6296.

On the energy front, Brent crude futures were last down 0.05% on ICE at $81.06 per barrel, while the NYMEX quote for West Texas Intermediate lost 0.03% to $77.35.

Inflation falls in Japan, although core price rises remain steady

In economic news, Japan’s inflation rate in March came in lower than February's print at 3.2%, marking the second straight month of slowing inflation after price rises reached a 41-year high of 4.3% in January.

However, core inflation, which excludes the effects of food and energy prices , held steady at 3.1%.

Meanwhile, Japan's manufacturing purchasing managers' index (PMI) rose to 49.5 in April from 49.2 in March, marking the slowest pace of contraction in the sector in six months, according to a flash reading from au Jibun Bank.

The flash services PMI was little changed at 54.9, down from 55 in March, while the flash composite index fell marginally to 52.5 in April from 52.9 in March.

PMI readings above 50 points signify expansion, while those below 50 indicate contraction.

“The rebound in Japanese tourism is encouraging, but is offset by weak manufacturing,” said Duncan Wrigley at Pantheon Macroeconomics.

“The Bank of Japan will be looking for signs that growth is broadening out, such as wage hikes in the tourist sector spilling over into the broader economy.

“The BoJ is likely to assess that Japan is still some way from achieving self-sustaining domestic growth.”

Finally on data, Australia’s services sector expanded in April, reaching a 10-month PMI high at 52.6, compared to March's 48.6, according to Juno Bank.

However, the manufacturing PMI fell to 48.1 in April from 49.1 in March, making for the second month in a row of deteriorating conditions for the sector.

Reporting by Josh White for Sharecast.com.