Asia report: Stocks higher, Japan economy shrinks in first quarter

Markets in Asia closed in positive territory on Tuesday, as investors digested the latest economic data out of Japan, as well as the minutes from the most recent meeting of Australia’s central bank.

In Japan, the Nikkei 225 was up 2.09% at 28,406.84, as the yen strengthened 0.21% against the dollar to last trade at JPY 108.98.

Of the major components on the benchmark index, robotics specialist Fanuc was up 2.77%, Uniqlo owner Fast Retailing added 3.3%, and technology giant SoftBank Group advanced 2.56%.

The broader Topix index was 1.54% firmer by the end of trading in Tokyo, closing at 1,907.74.

Fresh data out of Japan showed the country’s economy contracting by 5.1% year-on-year in the March quarter.

Seasonally-adjusted gross domestic product was down 1.3% quarter-on-quarter, a slightly wider fall than tha 1.2% decline predicted by analysts polled by Reuters.

Private consumption, meanwhile, fell 1.4% quarter-on-quarter, after a 2.2% rise in the fourth quarter of 2020.

“Given the state of emergency through most of the quarter, that’s not a bad result, underlining that consumers are adapting,” said Pantheon Macroeconomics chief Asia economist Freya Beamish.

Government consumption was weak, Beamish noted, falling 1.9% in the first quarter, after the 1.8% rise in the prior period.

“The authorities didn’t have anything in place to compensate for the suspension of the ‘Go To Travel’ programme,” she said, adding that public investment was also a drag.

“That should reverse, though, as this year’s fiscal spending kicks in, and we expect a supplementary budget to boot.”

Exports continued rising, in line with Pantheon’s expectations, at a 3.2% rate in the first quarter, after the 11.1% spike in the fourth quarter of 2020, while imports rose more substantially, by 4.9%, after the 4.0% increase in the previous period.

“These figures suggest businesses were caught off-guard by the state of emergency, with inventory contributing 0.3 percentage points to GDP growth, after the 0.6 point subtraction in the fourth quarter,” Freya Beamish said.

“At this stage, the best outcome for the second quarter looks like flat GDP, with the risks mounting that the state of emergency will be extended.

“The re-opening still seems a long way off for Japan, with slow progress on vaccines likely to hold the economy back until the fourth quarter at least.”

On the mainland, the Shanghai Composite added 0.32% to 3,529.01, and the smaller, technology-centric Shenzhen Composite managed gains of 0.17% to 2,324.27.

South Korea’s Kospi advanced 1.23% to 3,173.05, while the Hang Seng Index in Hong Kong was up 1.42% to 28,593.81.

The blue-chip technology stocks were mixed in Seoul, with Samsung Electronics flat, and SK Hynix 2.98% firmer.

Oil prices were higher as the region went to bed, with Brent crude last up 0.84% to $70.04 per barrel, and West Texas Intermediate rising 0.8% to $66.80.

In Australia, the S&P/ASX 200 rose 0.6% to 7,066.00, as investors pored through the minutes of the Reserve Bank of Australia’s May meeting.

In the minutes, members of the central bank said they believed the conditions for a hike in interest rates would not be present “until 2024 at the earliest”.

Across the Tasman Sea, New Zealand’s S&P/NZX 50 eked out a rise of 0.15% to 12,428.62, led by travel sector software company Serko, which was 4.9% firmer ahead of its annual results on Wednesday.

Serko reported in March that transaction volumes had recovered to 68% of pre-pandemic levels, at the upper end of the 30% to 70% range of scenarios it had prepared for.

That data came before the reopening of the border between New Zealand and Australia in April, which is expected to have seen a significant boost to the tourism sectors on both sides of ‘the ditch’.

Both of the down under dollars were stronger on the greenback, with the Aussie last ahead 0.37% at AUD 1.2826, and the Kiwi advancing 0.56% to NZD 1.3788.