Asia report: Markets jump on slowing US inflation

Stock markets across the Asia-Pacific region recorded significant gains on Thursday, following the release of a fresh inflation report in the US overnight that showed the smallest rise in consumer prices there in two years.

Patrick Munnelly, market analyst at TickMill Group, said the US inflation data bolstered global risk appetite and led to a reversal in money market pricing for a potential interest rate hike by the Federal Reserve beyond July.

“The positive sentiment prevailed, despite weaker-than-expected Chinese trade data, which failed to dampen the overall market spirit,” he noted.

“The Nikkei 225 reclaimed the 32,000 handle at the market open - the release of the US CPI data provided a positive catalyst for stocks in Japan and contributed to the upward movement.

“Both the Hang Seng Index in Hong Kong and the Shanghai Composite in mainland China saw gains.”

Munnelly noted that the Hang Seng outperformed due to strength in the technology sector, following Chinese Premier Li Yixiang’s meetings with several Hong Kong-listed tech giants.

“Premier Li endorsed the platform economy and pledged additional support for the tech sector.

“Meanwhile, gains in the mainland were somewhat limited due to the release of Chinese trade data that fell short of expectations.”

Asian bourses close in a sea of green

In Japan, the Nikkei 225 rose by 1.49% to close at 32,491.33, while the broader Topix index ended the day up 0.97% at 2,242.99.

Shares of Recruit Holdings, Daiichi Sankyo, and Sony emerged as significant gainers on Tokyo’s benchmark, with increases of 6.77%, 5.17%, and 4.5%, respectively.

Chinese markets also followed the positive trend, as the Shanghai Composite index increased 1.26% to 3,236.48 and the Shenzhen Component rose 1.61% to 11,095.44.

ARTS Group and China Publishing Media led the pack in Shanghai, both with gains exceeding 10%.

Hong Kong's Hang Seng Index jumped 2.6% to 19,350.62, driven by strong performances in the healthcare sector.

WuXi Biologics saw an increase of 8.93%, closely followed by JD Health at 8.37%, while Alibaba Health Information Technology also gained significantly, up by 6.98%.

In South Korea, the Kospi index edged up by 0.64% to 2,591.23, as Hanwha Ocean and Hanwha Solutions ended the trading day with gains of 5.33% and 5.01% respectively.

Australian shares experienced a robust day of trading with the S&P/ASX 200 climbing by 1.56% to 7,246.90.

Perseus Mining and Virgin Money UK were among the top gainers, rising 8.08% and 7.67% respectively.

New Zealand's S&P/NZX 50 was up 0.88% to 12,013.43, led by Scales Corporation and Fletcher Building, which gained a respective 3.32% and 3.14%.

In currency markets, the dollar was well and truly in the red, last trading down 0.07% on the yen at JPY 138.40.

Against the Aussie the greenback declined 0.73% to AUD 1.4625, while it dropped 0.87% on the Kiwi to change hands at NZD 1.5744.

On the commodities front, Brent crude futures were last up 0.21% on ICE at $80.28 a barrel, while the NYMEX quote for West Texas Intermediate inched up 0.08% to $75.81.

Bank of Korea holds rates while China’s trade surplus grows

In economic news, South Korea's central bank maintained its benchmark interest rate at 3.5% for the fourth consecutive meeting, despite indications of rising inflation.

The Bank of Korea (BoK) chose not to raise interest rates from the current 3.5% earlier in the day - a decision that it had maintained since its last rate hike in January.

In a statement, the central bank explained that even though South Korea's inflation rate was slowing, it was projected to exceed its 2% target for a significant time longer.

“We think the BoK's hawkish posture - signalling its openness to further rate hikes - is intended to shield the won in the event of broad dollar strength on the back of Fed rate hikes, thereby mitigating further import inflation,” said Duncan Wrigley at Pantheon Macroeconomics.

“In practice, the Bank is unlikely to actually raise rates this year, as downward pressures on the economy mount, while consumer inflation continues a gentle downward glide.

“We think the BoK will keep its policy rate unchanged for the rest of the year, balancing slowing growth against only gradually cooling inflation.”

Elsewhere, China reported a dollar-denominated trade surplus of $70.62bn in June, up from $65.81bn in May.

However, the figure fell short of the $74.8bn economists polled by Reuters had been anticipating.

There was also an unexpected decrease in the country's imports and exports, which fell 6.8% and 12.4% respectively, compared to the same period last year.

Finally on data, New Zealand’s factory activity took a significant hit in June, with the manufacturing purchasing managers index (PMI) falling to 47.6 from 48.9 in May.

The downturn marked the fourth consecutive month of contraction for the country's manufacturing sector, and represented the lowest level of activity since November 2022.

Reporting by Josh White for Sharecast.com.