Asia report: Stocks mixed after Fed decision, China factory data

Asia-Pacific markets experienced a mixed performance on Thursday as investors digested comments from US Federal Reserve chair Jerome Powell overnight, who hinted at a potential rate cut in September, contingent on favourable inflation data.

The region also reacted to various business activity readings, including the Caixin purchasing managers index from China.

“The optimistic sentiment from global markets overnight has helped Asian stock markets trade mainly higher on Thursday,” said TickMill market analyst Patrick Munnelly.

“This optimism results from the anticipation that the US Federal Reserve would decrease interest rates in September, which follows the Fed's monetary policy decision in which interest rates were left unchanged as expected but with a hint of future rate cuts in the accompanying statement.”

Munnelly said that despite the generally optimistic signs from global markets overnight, the Japanese market had given up all of its gains from the prior three sessions and was substantially lower.

“With weakening in all sectors following the Bank of Japan's hawkish turn of raising short-term policy rates and announcing plans to cut back on monthly bond purchases, the Nikkei 225 is down.”

Markets in a mixed state with Asian bourses mostly red

Japan's stock market saw significant declines, with the Nikkei 225 falling 2.49% to 38,126.33 and the Topix dropping 3.24% to 2,703.69.

The sharp declines were driven by a strengthening yen, which negatively impacted exporters.

Yamaha suffered a steep 14.13% drop, while Isetan Mitsukoshi and Toyota Tsusho declined by 10.52% and 10.42%, respectively.

China's markets also experienced downturns, though less severe, as the Shanghai Composite edged down 0.22% to 2,932.39, and the Shenzhen Component fell 0.92% to 8,673.58.

Zhejiang Kanglongda Special Protection Technology plunged 10%, leading the losses in Shanghai, followed by Heilongjiang Interchina Water Treatment, which fell 9.82%, and Shanghai DaZhong Public Utilities Group, down 7.2%.

Hong Kong's Hang Seng Index dropped 0.23% to 17,304.96, weighed down by the property and retail sectors.

Zhongsheng Group slid 6.55%, Longfor Properties fell 5.41%, and Li Ning Co decreased by 4.52%.

In South Korea, the Kospi bucked the regional trend, gaining 0.25% to close at 2,777.68.

The index was bolstered by strong performances from Hanwha Solutions, which surged 9.09%, Hanwha Ocean, up 6.71%, and EcoPro Materials, which gained 6.67%.

Australia's S&P/ASX 200 climbed 0.28% to a record high of 8,114.70, supported by gains in energy and tech stocks.

Contact Energy rose 5.41%, ZIP Co increased by 5.24%, and Life360 added 4.77%.

Across the Tasman Sea, New Zealand's S&P/NZX 50 also advanced, rising 0.67%.

Fonterra Shareholders Fund led gains with a 4.81% increase, followed by Sky Network Television and Synlait Milk, up 3.54% and 3.45%, respectively.

In currency markets, the dollar was last up 0.06% on the yen to trade at JPY 150.07.

The greenback also saw gains against its antipodean counterparts, last rising 0.23% on the Aussie to AUD 1.5322, and advancing 0.13% on the Kiwi, changing hands at NZD 1.6827.

Oil prices rose, with Brent crude futures last up 0.67% on ICE to $80.77 per barrel, and the NYMEX quote for West Texas Intermediate gaining 0.74% to $78.49.

Fed leaves door open for rate cuts, China factory activity contracts

In economic news, the US Federal Reserve concluded its Federal Open Market Committee meeting on Wednesday, deciding to maintain the federal funds rate within the current range of 5.25% to 5.5%.

While Federal Reserve chair Jerome Powell did not rule out future rate cuts, he emphasised that a significant reduction, such as a 50-basis-point cut, was not under consideration at this time.

“I don’t want to be really specific about what we’re going to do, but that’s not something we’re thinking about right now,” Powell stated, leaving the door open for adjustments depending on economic conditions.

In China, factory activity contracted in July, as reflected in the Caixin manufacturing purchasing managers' index (PMI), which recorded a reading of 49.8.

The figure fell short of the 51.5 expected by economists surveyed by Reuters, signalling a contraction in the manufacturing sector.

A PMI below 50 indicates shrinking activity, underscoring the challenges facing China’s industrial sector amid global economic uncertainties.

South Korea reported a 13.9% year-on-year increase in exports for July, reaching $57.49bn.

Despite the growth, the figure was below the 18.4% rise anticipated by economists in a Reuters poll.

The latest data followed a 5.1% export increase in the prior month, indicating continued but slower-than-expected expansion in the country’s trade sector.

Meanwhile, Hong Kong’s economy showed resilience, with its GDP growing 3.3% year-on-year in the second quarter.

That performance exceeded the 2.7% growth forecast by economists polled by Reuters.

Reporting by Josh White for Sharecast.com.