Asia report: Markets mixed as Aussie economic sentiment remains soft
Asia-Pacific markets closed mixed on Tuesday as investors evaluated the impact of US president Donald Trump’s decision to introduce 25% tariffs on steel and aluminum imports.
Trading in Japan was paused for a public holiday, while losses in China and Hong Kong contrasted with gains in South Korea, Australia, and New Zealand.
Stephen Innes, managing partner at SPI Asset Management, said the session was “set to be a slow burn” in Asia, with a light calendar keeping macro traders focused squarely on tariff developments and currency moves.
“But while the broader market waits for the next trade war chess move, all eyes should be on the yuan, as the gap between the People’s Bank of China’s daily fix and the spot market rate stretches dangerously close to record levels,” he noted.
“Since reopening post-Lunar New Year, China’s currency has been caught in a relentless downdraft, with USD-CNH climbing for four straight sessions, now back above 7.30.
“With momentum building, the critical 7.35 level from September 2023 is now within striking distance - a breach would be the first since December 2007, setting off alarm bells across FX markets.”
But Innes quipped that Beijing was not going down without a fight.
“The PBoC has been planting its flag around 7.17, using its daily fix as a psychological anchor to slow the yuan’s slide.
“The result? A widening spread between the official rate and where the market actually wants to trade.
“If this gap continues to stretch, we could see a forced intervention or stronger verbal guidance from policymakers to rein in expectations.”
Markets mixed as Trump tariff fallout continues
In China, the Shanghai Composite slipped 0.12% to 3,318.06, while the Shenzhen Component fell 0.69% to 10,557.62.
Property and technology stocks led declines, with Bright Real Estate Group plunging 8.33%, Routon Electronic dropping 6.78%, and 360 Security Technology falling 6.48%.
The Hang Seng Index in Hong Kong lost 1.06% to close at 21,294.86, weighed down by a steep 10.27% decline in Geely Automobile and losses of over 7% in Xinyi Solar Holdings and Nongfu Spring.
South Korea’s Kospi 100 rose 0.67% to 2,540.05, supported by strong performances in industrial and technology stocks.
Hanwha Techwin surged 20.58%, while Hanwha Ocean gained 8.95% and LG Innotek added 5.75%.
In Australia, the S&P/ASX 200 edged up 0.01% to 8,484.00, with Nine Entertainment surging 14.01%, SGH rising 6.15%, and Ora Banda Mining gaining 5.17%.
Across the Tasman Sea, New Zealand’s S&P/NZX 50 advanced 0.32% to 12,917.45, as Synlait Milk, Vector, and Eroad posted modest gains.
In currency markets, the dollar was last up 0.03% on the yen, trading at JPY 152.05, while it weakened 0.02% against the Aussie to AUD 1.5927, and retreated 0.11% from the Kiwi, changing hands at NZD 1.7707.
Oil prices rose, with Brent crude futures last up 1.29% on ICE at $76.85 per barrel, and the NYMEX quote for West Texas Intermediate gaining 1.26% to $73.23.
Australian consumer sentiment remains subdued, business conditions soften
In economic news, Australia’s consumer sentiment remained subdued in February, with the Westpac-Melbourne Institute consumer sentiment index edging up just 0.1% to 92.2.
The reading indicated a cautiously pessimistic outlook, as stretched household finances continued to weigh on sentiment.
While consumers remained wary about the broader economy, optimism about personal finances over the next year improved.
The index’s sub-components showed little movement, with a decline in current financial assessments offset by small gains elsewhere.
The ‘family finances versus a year ago’ measure fell 3.4% to 75.1, suggesting a larger-than-usual post-holiday financial strain and a possible fading boost from tax cuts and fiscal support.
However, expectations for the year ahead remained positive, particularly among mortgage holders, as easing inflation and potential interest rate cuts provided some relief.
Meanwhile, Australian business conditions softened in January, reversing gains from the previous month, according to NAB’s latest business survey.
Trading conditions and profitability declined, though employment saw a slight rise.
Business confidence improved, climbing to +4 index points, with gains across multiple industries.
The survey indicated a continued downward trend in capacity utilisation, which fell to 82.0%, though it remains above historical averages.
While some resilience in demand persists, activity indicators such as capital expenditure weakened, suggesting economic growth remains sluggish.
Recent data showing a late fourth-quarter rebound in household spending may need to continue for a broader recovery in business conditions.
Reporting by Josh White for Sharecast.com.