Asia report: Stocks rise as China inflation comes in lower than expected

Stocks in Asia closed in positive territory on Wednesday, as tensions around Russia and Ukraine eased, while consumer inflation in China came in slightly lower than expected.

In Japan, the Nikkei 225 was up 2.22% at 27,460.40, as the yen weakened 0.05% against the dollar to last trade at JPY 115.67.

It was a positive day for the benchmark’s major components, with automation specialist Fanuc up 1.68%, fashion firm Fast Retailing jumping 2.32%, and technology conglomerate SoftBank Group ahead 1.51%.

The broader Topix index was 1.67% firmer by the end of trading in Tokyo, settling at 1,946.63.

On the mainland, the Shanghai Composite managed gains of 0.57% to 3,465.83, and the smaller, technology-heavy Shenzhen Composite was 0.59% higher at 2,296.99.

Fresh data out of Beijing showed inflation coming in below expectations for January, with China’s consumer price index rising 0.9% year-on-year.

Analysts polled by Reuters had pencilled in an increase of 1.0%.

Input inflation was also below forecasts, with the producer price index riosing 9.1% on the year in January, compared to the 9.5% earmarked by Reuters polling.

Craig Botham at Pantheon Macroeconomics said the drop in inflation would have been greater if not for seasonal effects, with the Lunar New Year holiday supporting food and services prices.

“Certainly, we had expected more of a slowdown, given the plunge in wholesale food prices, and suspect the earlier holiday this year has driven a slight disconnect,” he noted.

“We think food prices will remain in deflationary territory until June, while both energy and core inflation should continue to slow in year-on-year terms, assuming no repeat of the energy crisis, and thanks to falling PPI, respectively.

“Services inflation may rise a little further from here, but a soft labour market, and continued zero-Covid restrictions, should see it plateau fairly soon.”

South Korea’s Kospi advanced 1.99% to 2,729.68, while the Hang Seng Index in Hong Kong was 1.49% higher at 24,718.90.

The blue-chip technology stocks were on the front foot in Seoul, with Samsung Electronics up 1.49%, and SK Hynix rising 2.76%.

“Investors loved the sound of peace and the risk appetite came back yesterday as Russians started pulling a part of their troops back from the Ukrainian border,” said Swissquote senior analyst Ipek Ozkardeskaya of the global situation on Wednesday morning.

“Although, news of a cyber-attack on some Ukrainian banks and some government websites including the defence ministry’s website raised a couple of eyebrows again, and turned all eyes to the Russians.

“But there is no report suggesting that Russia is behind the cyber-attack just yet.”

Oil prices were higher at the end of the Asian day, with Brent crude last up 0.86% at $94.08 per barrel, and West Texas Intermediate ahead 0.83% at $92.83.

In Australia, the S&P/ASX 200 was ahead 1.08% at 7,284.90, while across the Tasman Sea, New Zealand’s S&P/NZX 50 rose 1.54% to 12,121.89.

The down under dollars were both stronger on the greenback, with the Aussie last ahead 0.33% at AUD 1.3937, and the Kiwi advancing 0.16% to NZD 1.5040.