Asia report: Stocks mixed ahead of key central bank decisions

Asia-Pacific markets showed mixed performance on Monday, as investors keenly anticipated crucial interest rate decisions from a trio of central banks.

The US Federal Reserve, the European Central Bank, and the Bank of Japan are all due to meet and make their next rate moves in the coming days.

“Asian equity markets traded with a mixed tone as the region approached a week filled with significant risk events, including major central bank meetings and data releases,” said TickMill Group market analyst Patrick Munnelly.

“The Nikkei 225 initially displayed strong performance, advancing and testing the 32,500 handle as market participants anticipated that the Bank of Japan would maintain its accommodative policy later in the week.

“BoJ officials reportedly see little need to adjust the yield curve control programme, given the improved functioning of the bond market and the smooth yield curve.”

Additionally, Munnelly noted that the latest producer price data came in softer than expected, showing a fifth consecutive month of easing in wholesale inflation.

“This further supports the case for the BoJ to refrain from making any policy adjustments.

“The Hang Seng Index and Shanghai Composite remained subdued due to weakness in the healthcare and property sectors.

“The property sector was particularly pressured following a warning from Goldman Sachs, however losses were mitigated by expectations of potential rate cuts by the People's Bank of China to support the economy.”

Stocks mixed ahead of key central bank decisions

In Japan, the Nikkei 225 ended the day with an increase of 0.52% at 32,434.00 points, while the Topix index advanced 0.65% to close at 2,238.77 points.

Taiheiyo Cement led the gainers on Tokyo’s benchmark with a rise of 4.53%, followed by Nippon Paper Industries and Daiichi Sankyo, which increased 4.33% and 4.11% respectively.

However, Chinese markets were divergent, as the Shanghai Composite fell 0.08% to 3,228.83 points, while the Shenzhen Component rose 0.74% to 10,873.74 points.

Individual stocks in Shanghai saw significant drops, with Guizhou Yibai Pharmaceutical falling 9.9%, and Duzhe Publishing & Media following closely with a 9.58% decrease.

In Hong Kong, the Hang Seng Index ticked up slightly by 0.07% to finish at 19,404.31 points.

Xinyi Solar and Trip.com Group led the gainers, up 2.86% and 2.6% respectively, with Haier Smart Home also making gains of 1.91%.

South Korea's Kospi fell by 0.45% to close at 2,629.35 points, with Amore Group among the biggest fallers with a 7.11% loss, followed by LG Household, which decreased by 3.89%.

Australian markets remained closed in observance of the King's Birthday holiday in New South Wales.

In New Zealand, the S&P/NZX 50 declined 0.64% to 11,615.55 points, as Eroad led the losers with a fall of 6.17%, while Freightways dropped 3.89%.

In currency markets, the dollar depreciate 0.1% against the yen to last trade at JPY 139.26, and 0.36% on the Aussie to AUD 1.4780.

The greenback also slipped 0.21% against the Kiwi, to change hands at NZD 1.6281.

Oil prices were down as well, with Brent crude futures last falling 1.71% on ICE to $73.51 per barrel, and the NYMEX quote for West Texas Intermediate losing 2.04% to $68.74.

Wholesale prices cooler than expected in Japan

In economic news, Japan's wholesale prices saw a 5.1% year-on-year increase in May, marking a slower pace than the 5.8% hike in April, and falling short of the 5.5% increase predicted by economists, according to a poll by Reuters.

The rate of increase in the producer price index was the lowest since July 2021.

On a monthly basis, wholesale prices in May experienced a 0.7% dip, significantly steeper than the 0.2% decline predicted by Reuters.

Despite those developments, anonymous sources told Reuters that the Bank of Japan was set to retain its ultra-loose monetary policy in its meeting this week.

Reuters said the central bank could acknowledge that inflation was exceeding its predictions, potentially leading to an upward adjustment of its inflation outlook during its quarterly review in July.

However, the source said that even if the BoJ decided to raise its inflation view, that would not necessarily be followed by an automatic interest rate hike.

Reporting by Josh White for Sharecast.com.