Asia report: Markets mixed after slew of China, Japan data

Stock markets in Asia closed mixed on Wednesday, as investors digested a slew of economic data out of the region, and looked ahead to the outcome of the two-day Federal Reserve meeting in the US later in the global day.

In Japan, the Nikkei 225 was down 0.51% at 29,291.01, as the yen strengthened 0.11% against the dollar to last trade at JPY 109.96.

Automation specialist Fanuc was up 0.68%, while among the benchmark’s other major components, fashion firm Fast Retailing was down 2.72%, and technology conglomerate SoftBank Group down 0.41%.

The broader Topix index eked out gains of 0.02% by the end of trading in Tokyo, closing at 1,975.86.

Official data showed exports out of Japan expanded by 49.6% year-on-year in May, although that figure from the Ministry of Finance didn’t quite reach the 51.3% growth anticipated in a Reuters poll.

On the mainland, the Shanghai Composite lost 1.07% to 3,518.33, and the smaller, technology-heavy Shenzhen Composite dropped 2.32% to 2,332.41.

Fresh data out of Beijing showed China’s industrial output expanded by 8.8% year-on-year in May.

That was lower than the 9.8% growth reported for April, and also missed the 9% improvement pencilled in by analysts polled by Reuters.

“Consensus looked right to us on this one, but the official year-on-year growth rate implies that production rose only minimally month-on-month in May, after declines in the previous two months; the published year-on-year rates don’t marry up with the official month-on-month figures, which show stable rises in May and April,” said Pantheon Macroeconomics chief Asia economist Freya Beamish.

“Our stumble was in underestimating the lag between the revival in local government debt issuance and infrastructure-related production.

“In the event, production of all the main construction items available at this stage fell month-on-month.”

Beamish said the problems with parts supply also seemed to be a constraint, with production of motor vehicles falling sharply for a second straight month, while chips were a bright spot.

“In short, production is facing strong headwinds at the moment, but infrastructure demand should soon recover, and the supply constraints should gradually ease, though specific markets will take a long time to pick up speed.”

Retail sales in the People’s Republic also missed expectations, increasing at 12.4% over the prior year in May, more than 100 basis points lower than the 13.6% rise picked in Reuters polling.

“We had expected a month-on-month rebound, but instead the value of sales fell 1.0% in May, after the 4.5% drop in April,” Freya Beamish added.

“Online sales also have weakened sharply in the last few months, but we have been less concerned by that, as it’s consistent with greater high street spending.

“Metro traffic softened as well in May, though the series is not long enough to seasonally adjust.”

In real terms, Beamish said Pantheon’s view was that sales simply edged down, after a 4.6% fall in April.

“The details suggest that work-from-home demand is finally coming off the boil, presumably due to saturation, while high street shopping is not yet ready to pick up speed.

“The Delta variant is a serious threat, but China’s vaccination drive is progressing rapidly, so we still hold out hope for a revival of spending in the second half.”

South Korea’s Kospi was ahead 0.62% to 3,278.68, while the Hang Seng Index in Hong Kong fell 0.7% to 28,436.84.

Seoul’s blue-chip technology stocks were in the green, with Samsung Electronics up 1.11% and SK Hynix 0.78% firmer.

The moves in Asia came after equities on Wall Street fell overnight, as investors looked ahead to the end of the Federal Open Market Committee’s two-day policy meeting later on Wednesday.

Market watchers were set to keep a watch for the central bank’s latest commentary on inflation, given the recent surge in American consumer prices, and its possible effect on the Fed’s plans.

Oil prices were higher at the end of the Asian day, with Brent crude last up 0.31% to $74.22 per barrel, and West Texas Intermediate rising 0.26% to $72.31.

In Australia, the S&P/ASX 200 managed gains of 0.09% to 7,386.20, while across the Tasman Sea, New Zealand’s S&P/NZX 50 slipped 0.9% to 12,581.60.

Both of the down under dollars were stronger on the greenback, with the Aussie last ahead 0.25% at AUD 1.2976, and the Kiwi advancing 0.31% to NZD 1.3998.