Josh White Sharecast News
16 May, 2024 10:56 16 May, 2024 10:35

Asia report: Markets rise despite deeper Japan GDP contraction

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Japan Exchange GroupSharecast graphic / Josh White

Asia-Pacific markets saw gains on Thursday, buoyed by Wall Street's record performance overnight driven by lower-than-expected inflation data in the US.

The US consumer price index rose 0.3% in April, slightly below the anticipated 0.4% rise, making for a year-on-year increase of 3.4%.

However, Japan's economy faced setbacks, with its first-quarter GDP contracting more than anticipated, casting doubts on the Bank of Japan's potential interest rate hikes.

“Equity markets in the Asia-Pacific region continued to rise, reflecting the positive momentum in US and European markets,” said TickMill market analyst Patrick Munnelly.

“The latest US data, which showed a slow start to the second quarter for retail sales and no surprises in April CPI inflation, played a key role in this trend.

“As a result, there is now a growing expectation of Fed rate cuts later in the year, with two quarter-point reductions already being fully accounted for.”

Munnelly noted that there were no major UK or eurozone data releases on Thursday.

“Market attention remains focussed on analysing yesterday's US CPI inflation and retail sales figures to assess their impact on monetary policy expectations.

“These data have eased concerns about a resumption of Fed interest rate hikes, potentially strengthening the current stance of maintaining rates at their current levels while waiting for further data.”

Markets a sea of green across the region

In Japan, the Nikkei 225 climbed by 1.39% to 38,920.26, and the Topix edged up by 0.24% to 2,737.54.

Credit Saison led the gains on Tokyo’s benchmark with an 11.75% rise, followed by Recruit Holdings at 9.11%, and Japan Steel Works at 6.55%.

China's markets had modest gains, with the Shanghai Composite up 0.08% to 3,122.40 and the Shenzhen Component rising 0.21% to 9,604.13.

Asia Cuanon Technology Shanghai surged 9.95% in Shanghai, and Hua Yuan Property increased by 7.09%.

Hong Kong's Hang Seng Index jumped by 1.59% to 19,376.53, driven by a strong performance in Chinese property stocks.

Longfor Properties soared by 10.93%, Ping An Insurance rose 7.1%, and Galaxy Entertainment Group gained 6.39%.

The surge for property plays followed reports that China's State Council was considering purchasing unsold homes from struggling developers to stabilise the property market.

South Korea's Kospi index increased by 0.83% to 2,753.00, with Samsung Fire & Marine Insurance and DB Insurance posting significant gains of 9.96% and 7.11%, respectively.

Australia's S&P/ASX 200 rose by 1.65% to 7,881.30, with Aristocrat Leisure leading the gains at 12.3%, and Charter Hall Group advancing by 6.66%.

New Zealand's S&P/NZX 50 saw the largest regional gain, climbing 1.75% to 11,728.06.

Ryman Healthcare leapt 8.75% in Wellington, while Fonterra Shareholders Fund increased by 7.02%.

In currency markets, the dollar was last down 0.09% on the yen to trade at JPY 154.74.

The greenback meanwhile rose against the Aussie and the Kiwi, by 0.22% on the former to AUD 1.4973, and by 0.18% against the latter to change hands at NZD 1.6364.

Oil prices remained relatively stable, with Brent crude futures last up 0.04% on ICE at $82.78 per barrel, and the NYMEX quote for West Texas Intermediate increasing 0.06% to $78.68.

Japan’s economy contracts more than expected, unemployment rises down under

In economic news, Japan's economy contracted at an annualised rate of 2% in the first quarter of the year, more than the 1.5% contraction anticipated by a Reuters poll.

The deeper-than-expected downturn raised concerns about the Bank of Japan's plans to increase interest rates.

The BoJ maintained its benchmark policy rate at 0% to 0.1% during its April meeting, stating that future economic conditions would guide its monetary policy decisions.

“The softer dollar lifts some of the burden off USD-JPY, especially after the latest GDP data warned that growth in Japan shrank more than expected in the first quarter, and lowered the chances of seeing the Bank of Japan normalise its policy soon,” said Swissquote Bank senior analyst Ipek Ozkardeskaya.

“Happily for the BoJ, the dollar is being sold across the board, otherwise we would’ve seen another spike in USD-JPY.

“The trend and momentum indicators remain supportive of a further decline and the downside correction could continue toward the JPY 152.85 without the need to change the narrative.

“But the BoJ’s reluctance to act could make a move below this level complicated.”

In Australia, the seasonally adjusted unemployment rate rose to 4.1% in April from a revised 3.9% in March, according to the Australian Bureau of Statistics.

Despite the increase, the employment-to-population ratio remained steady at 64.0%, suggesting that employment growth was keeping pace with population growth.

Bjorn Jarvis, head of labour statistics at the ABS, noted that the labour market remained tight, though less so than in late 2022 and early 2023.

Reporting by Josh White for Sharecast.com.

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