Asia report: Markets fall as Japan's wholesale inflation rises

Asia-Pacific markets experienced a downturn on Tuesday despite a broad rebound on Wall Street overnight.

Contributing to the cautious mood in the region was new data from Japan indicating that wholesale inflation surged at its fastest rate in nearly a year.

“Concerns over China's economic stability have resurfaced, driven by the deepening financial crisis at China Evergrande Group,” said SPI Asset Management’s managing partner Stephen Innes.

“These worries gained momentum on Monday when the company's mainland subsidiary announced its failure to repay an onshore bond, casting a new shadow of risk over China's economic recovery efforts.

“While this development may not surprise those closely following China's property market, it has reignited concerns that the country's housing sector is still deteriorating rather than showing signs of improvement and that financial stability risks are rising.”

Furthermore, Innes said there was also a growing sense of unease over whether China's authorities were taking sufficient measures to support the overall economy.

“However, it's worth noting that we should not expect Beijing to deploy a fiscal ‘bazooka’ similar to what was seen during the Global Financial Crisis, automatically revitalising the economy.”

Equities in the red across the region

In Japan, the Nikkei 225 tumbled by 1.11%, closing at 32,315.05, while the Topix index fell 0.57% to 2,371.94.

Major laggards on Tokyo’s benchmark included pharmaceutical companies Eisai, which dipped by 5.21%, and Daiichi Sankyo, dropping by 4.3%.

Dainippon Screen Manufacturing also experienced a 3.83% decline.

China observed negative trends, with the Shanghai Composite declining 0.43% to settle at 3,102.27 and the Shenzhen Component retracting by 0.6% to finish at 10,060.15.

Among the largest decliners in Shanghai were Chongqing Fenghwa Group, which plunged 9.97%, and Beijing Yuanliu Hongyuan Electronic Technology, slipping 8.21%.

Over in Hong Kong, the Hang Seng Index decreased by 1.46% to 17,470.31.

Significant performers in the red were Xinyi Glass Holdings, down by 5.88%, Sunny Optical Technology, retreating 5.6%, and sportswear manufacturer Li Ning Co, which fell by 5.18%.

South Korea's Kospi index was also affected, dropping 1.31% to close at 2,462.97, with noteworthy declines included Hanjinkal, with a 5.14% decrease, and Hotel Shilla, falling 4.36%.

Australia's S&P/ASX 200 saw a less pronounced decrease, dropping by 0.54% to finish at 7,038.20.

Among the hardest hit were Genesis Minerals, down 7.19%, and De Grey Mining, which fell by 4.1%.

In New Zealand, the S&P/NZX 50 registered a 0.3% drop, closing at 11,342.87, with the pullback led by Mainfreight, down 2.6%, and the Fonterra Shareholders Fund, which retracted by 2.51%.

On the currency front, the dollar was last 0.06% weaker against the yen, trading at 148.79.

The greenback meanwhile managed gains of 0.17% on the Aussie to AUD 1.5594 and 0.05% against the Kiwi to change hands at NZD 1.6767.

In terms of oil prices, both Brent crude and West Texas Intermediate futures were in the red, with the former down 1.35% on ICE at $92.03 and the latter 1.42% lower on NYMEX at $88.41 per barrel.

Japan’s service sector sees rapid wholesale inflation as PM proposes stimulus

In economic news, Japan saw a sharp acceleration in its service producer price index (PPI) in August, with a year-on-year rise of 2.1%.

That marked the quickest growth in a year, surpassing the 1.7% recorded in July.

Notably, the figure was the third consecutive month to report a hastening of wholesale inflation in the service sector.

In a month-to-month comparison, the service PPI recorded a modest climb of 0.1%.

Japan's prime minister Fumio Kishida unveiled an economic rejuvenation strategy in response to the economic landscape.

Japanese news outlets detailed that the plan emphasised domestic tax reliefs alongside initiatives to bolster wage growth.

As reported by the Japan Times, Kishida's vision for the nation's economy was to “propel investments and wage increments by implementing measures like decreasing tax and social security impositions.”

Elsewhere, Nikkei quoted the PM as emphasising his aspiration to “instigate a beneficial economic loop, encompassing capital investment, salary enhancements, and investment in human capital”.

Reporting by Josh White for Sharecast.com.