Asia report: Shares lower on Powell comments; China outperforms on PMI

Asian shares were broadly lower on Thursday on warnings from central bankers that inflationary pressures would continue, fuelling worries over a recession.

Federal Reserve Chair Jerome Powell warned inflation would persist for longer than initially thought as bankers gathered at the European Central Bank’s annual forum in Portugal.

Powell on Wednesday said there was “no guarantee” inflation could be tamed without hurting the job market. Equities in Japan, down 1.5%, Australia (1.98%), South Korea (1.5%) and Hong Kong (0.5%) all fell sharply in response.

May industrial production in Japan slumped 7.2% compared with May - the sharpest decline since the start of the coronavirus pandemic in early 2020, reflecting disruptions in China due to the pandemic.

China bucked the trend to make strong gains of 1.57% after data showed a strong pickup in services spending as Covid outbreaks and restrictions were gradually eased.

A monthly purchasing managers' index rose to 50.2 in June from 49.6 after factories, shops and offices in Shanghai and other cities were allowed to reopen. A number above 50 indicate activity is increasing.

Shares were also boosted by the People’s Bank of China repeating its pledge to provide stronger monetary policy support for the economy to stabilise jobs and inflation. Chinese tourism-related stocks rallied as the government eased some domestic travel rules.