Asian markets decline on underwhelming Australian GDP data

Most share markets across Asia booked losses for a second consecutive day as traders digested underwhelming growth data from Australia.

Australia’s S&P/ASX 200 dropped 0.5% to 5901 and Japan’s Nikkei 225 closed 0.6% to 18704. Hong Kong's Hang Seng Index dropped nearly 10% to 24.465 while South Korea’s Kospi Composite ended a tad lower, off 0.1% at 1998.29.

The declines followed the retreat by indices on Wall Street on Tuesday, with the S&P 500 falling from fresh record highs.
Traders across the world cut exposure to risk in anticipation for an onslaught of key events later this week with the European Central Bank’s policy meeting on Thursday and the US jobs report due on Friday.

Data from Australia showed the country grew at just 0.5% in the last quarter of 2014, below the consensus estimate at 0.6%, but up from an upwardly revised 0.4% in the prior quarter. The year-to-year rate was 2.5%, the slowest pace in four quarters.
The disappointing GDP data came a day after the Reserve Bank of Australia surprised the market and held steady on policies, though did go as far as hinting over the prospects of more rate cuts in coming quarters.

In mainland China, the Shanghai Composite bucked the trend of its Asian counterparts by bouncing up by 0.5% as investors welcomed data out of China’s services sector which showed growth at a modest pace in February, as new orders rose at their quickest pace in three months.

According to data compiled by HSBC and Markit, China’s purchasing managers’ index (PMI) for the services sector rose to 52, from the six-month low of 51.8 in January. A reading above 50 reflects growth while below 50 indicates contraction.

A sub-index for new orders rose to 52.2 in February from 51.2 in January and the sub-index measuring new business also rose.

HSBC/Markit also released data for the composite Chinese PMI for February, combining the results for both manufacturing and services, which rose to 51.8 in February from 51 in January, marking a five month high.

The data showed the pace of growth was softer than the official surveys from China over the weekend which showed growth in the sector picked up to 53.9 in February from January's 53.7, which the National Bureau of Statistics attributed to strong holiday spending during the Chinese New Year.

China’s services sector accounts for around 48% of the country’s GDP and relies less on foreign demand, helping it weather the downturn that the industrial and manufacturing sectors have felt in the past 18 months.

Market participants are hoping that the latest efforts by the central bank of China to embark on additional stimulus to support growth can filter through into the real economy, helping the services sector regain strength. Chinese policy-makers this week are set to announce a 2015 growth target at the opening of the annual session of China's legislature.

In India, the Bombay Sensex index fell 0.72% to 29,381 after rallying as much as 434 points in trade on Wednesday to hit 30,000 level in a record first for the index. The rupee also slipped below 62 mark versus the US dollar.

The weakness comes after the Reserve Bank of India delivered another 25 basis point reduction in the repo rate, just after the budget and the firming up of the new monetary policy framework earlier this week.

FX strategists at Barclays think monetary easing is positive for capital flows and the Indian rupee. “We continue to recommend that constructive views on the Indian rupee should be expressed against the euro currency and/or other low-yielding emerging market currencies,” added the strategists.