Asia report: Markets mixed as Japan records biggest GDP contraction ever

Markets in Asia finished in a mixed state on Monday, as investors held their breath over tensions between Washington and Beijing, and digested the latest economic data out of Japan.

In Japan, the Nikkei 225 was down 0.83% at 23,096.75, as the yen strengthened 0.15% against the dollar to last trade at JPY 106.44.

Of the major components on the benchmark index, automation specialist Fanuc was down 0.41%, fashion firm Fast Retailing lost 0.93%, and technology conglomerate SoftBank Group was off 1.41%.

The broader Topix index ended the session 0.84% weaker in Tokyo, closing at 1,609.82.

In fresh economic data out of Japan, the country’s economy shrank 27.8% year-on-year in the June quarter, making for the biggest contraction on record.

It was also slightly wider than the 27.2% decline picked by economists polled by Reuters.

Miguel Chanco, senior Asia economist at Pantheon Macroeconomics, said the damage was broad-based as expected, with the nationwide state of emergency that enveloped most of the second quarter "killing domestic demand and the near-global lockdown dealing a body-blow to exports".

"Looking forward, expect to see a GDP bounce-back in the current quarter to the tune of 6%, thanks in large part to the very low base set in Q2," he said.

"The recovery, overall, will be more gradual than the steepness of the downturn, due to the second Covid-19 wave having over domestic demand and the still-uneven relaxation of restrictions globally.”

On the mainland, the Shanghai Composite was 2.34% firmer at 3,483.80, and the smaller, technology-heavy Shenzhen Composite rose 1.92% to 2,287.34.

China's central bank extended CNY 700bn of one-year loans via its medium-term lending facility on Monday, up from the two batches of loans worth a combined CNY 550bn, that were due to expire in August, at the same rate of 2.95%.

South Korean markets were closed for a public holiday, while the Hang Seng Index in Hong Kong was ahead 0.65% at 25,347.34.

Geopolitical tensions between the United States and China were front and centre once again, amid claims over the weekend that a review of the trade deal between the two economic superpowers, due to take place on Saturday, was delayed.

The report from Reuters cited sources “familiar” with the matter as claiming that the delay was due to scheduling conflicts, with no new date agreed upon.

That came after US President Donald Trump signed an executive order on Friday, compelling Chinese technology firm ByteDance to sell or spin-off its TikTok social media business in the US within 90 days.

Trump said in the order that there was “credible evidence” that ByteDance could “threaten to impair” US national security.

Oil prices were higher as the region went to bed, with Brent crude last up 0.02% at $44.81 per barrel, and West Texas Intermediate adding 0.14% to $42.07.

In Australia, the S&P/ASX 200 lost 0.81% by the end of trading to finish at 6,076.40, while across the Tasman Sea, New Zealand’s S&P/NZX 50 was up 1.93% at 11,672.95.

A fresh Covid-19 lockdown in New Zealand’s largest city, Auckland, was extended on Friday to last until at least 26 August, as health authorities work to contain a growing outbreak of the coronavirus.

Prime Minister Jacinda Ardern also confirmed on Monday that the country’s election would be delayed by four weeks, to 17 October, due to the outbreak.

The country had gone 102 days without any domestically-transmitted infections, before a fresh handful of positive tests forced Auckland back into lockdown last week.

The down under dollars were a mixed affair against the greenback, with the Aussie last 0.22% stronger at AUD 1.3922, while the Kiwi weakened 0.19% to NZD 1.5307.