Asia report: Markets mixed as business sentiment improves in Japan

China stocks led declines among Asia-Pacific markets on Wednesday as investors digested fresh data showing an improvement in business sentiment in Japan ahead of the interest rate decision from the US Federal Reserve.

Patrick Munnelly, market analyst at TickMill, said markets in the region traded mixed as investors were cautious ahead of the FOMC announcement.

"The Nikkei 225 increased modestly thanks to an encouraging Tankan survey, which showed improved sentiment among Japan's large manufacturers and non-manufacturers.

"On the other hand, the Kospi fell due to an increase in the unemployment rate.

"The Hang Seng and Shanghai Composite also declined despite China's policy focus for next year and support pledges, as there were no major stimulus announcements in the statement from the Central Economic Work Conference."

Markets mixed across the region

In Japan, the Nikkei 225 edged up by 0.25% to reach 32,926.35 points, while the Topix index showed a modest gain of 0.08%, closing at 2,354.92 points.

Leading the gainers on Tokyo's benchmark were Advantest, up 5.59%, Tokyo Electron, up 4.71%, and Mitsui Engineering & Shipbuilding, up 4.28%.

Conversely, Chinese stocks faced declines, with the Shanghai Composite dropping by 1.15% to settle at 2,968.76 points and the Shenzhen Component declining by 1.54% to reach 9,476.62 points.

Among the notable losers were Fujian Longking, down 6.9%, and Beijing Urban Construction Investment & Development, down 6.08%.

Hong Kong's Hang Seng Index also decreased, slipping by 0.89% to 16,228.75 points.

Key decliners included Xinyi Glass, down 5.66%; Wharf Real Estate, down 4.76%; and Orient Overseas International, down 4.16%.

In South Korea, the Kospi index recorded a 0.97% decline, closing at 2,510.66 points.

Companies such as Posco Future M were down 4.55%, and KakaoPay dropped 3.82%.

Australia, on the other hand, saw its S&P/ASX 200 index gain 0.31%, reaching 7,257.80 points, with Sydney's gainers led by Neuren Pharmaceuticals, up 6.53%, and Star Entertainment Group, up 4.35%.

New Zealand's S&P/NZX 50 index posted a positive performance, rising by 0.82% to finish at 11,475.77 points.

Auckland International Airport gained 3.98%, and SkyCity Entertainment Group rose 3.43%.

In currency markets, the dollar was last up 0.25% on the yen, trading at JPY 145.82, while it edged up 0.08% against the Aussie to AUD 1.5257.

The greenback exhibited a more significant increase of 0.71% against the Kiwi, meanwhile, changing hands at NZD 1.6418.

In oil markets, Brent crude futures were last down 0.38% on ICE at $72.96 per barrel, while the NYMEX quote for West Texas Intermediate was off 0.39% at $68.34 per barrel.

Business sentiment improves in Japan, Korean unemployment rises

In economic news, the Bank of Japan's quarterly Tankan survey revealed a stronger-than-expected improvement in business sentiment among large manufacturers.

The Tankan reading for major Japanese manufacturers rose to +12, surpassing economists' expectations of +10, according to Reuters polling.

Additionally, the reading for large non-manufacturers increased to +30 from +27, marking the seventh consecutive quarter of improvement and exceeding the Reuters poll's estimate of +27.

A positive index reading in the Tankan survey signifies that optimistic respondents outnumber pessimistic ones.

"The Bank of Japan will be modestly cheered by the improved sentiment in the Tankan index, notably that firms feel severe cost pressures are abating," said Duncan Wrigley at Pantheon Macroeconomics.

"But the outlook index fell and employment conditions forecast indices remain deeply negative, at -25 for large manufacturers and -37 for large non-manufacturers."

Wrigley said that cast doubts about the willingness of employers to grant unions' assertive wage demands in the upcoming spring talks.

"The BoJ will likely keep the negative policy rate in place at next week's policy meeting."

Meanwhile, South Korea faced a rise in its unemployment rate, reaching its highest level since July, according to government data.

The country's seasonally adjusted jobless rate climbed to 2.8% last month, up from 2.5% in October.

Additionally, data showed that South Korea's economy added fewer jobs in November, totalling approximately 277,000 new positions compared to the 346,000 additions in the previous month.

South Korea achieved a record-low unemployment rate of 2.4% in August.

Reporting by Josh White for Sharecast.com.