Asia report: Markets mixed as Japan stimulus expectations heat up

Asian markets ended mixed on Wednesday, with Japanese stocks rebounding from their sell-off on Tuesday as investors eagerly await key central bank decisions as well as a number of earnings reports in the region.

In Tokyo, the Nikkei 225 added 1.72% to finish at 16,664.82, while the Topix was up 1.13% at the close.

Markets in the country received an additional boost towards the end of the session after reports emerged that Prime Minister Shinzo Abe and his government is preparing a stimulus package of JPY 28 trn in a bid to strengthen the economy.

The package would be much larger than earlier estimate for a package worth around JPY 20trn.

Yen was weaker in the wake of the multitude of rumours surrounding the package, and was last 0.76% behind the greenback at JPY 105.46 per $1.

The Ministry of Finance was forced to deny during the day that it was considering issuing 50-year bonds, in the wake of a Wall Street Journal report suggesting they were.

Rumours were also churning around the Bank of Japan, with the Nikkei saying officials at the central bank were mulling over a number of stimulus proposals ahead of its two-day policy meeting, beginning on Thursday.

The newspaper said the BoJ’s main options are to cut interest rates even further than their current -0.1% level, buy more bonds, or expand its purchasing programme of other assets.

Analysts were still wary of an impending sell-off, given expectations for a large stimulus are running high.

“The major downside risk is of perception - since the market has set the bar extremely high for the BOJ, itchy trigger fingers are waiting,” said OANDA senior trader Stephen Innes

“"Should the BOJ decide to delay a policy change at the September meeting, I doubt the forward guidance will be enough to sustain current dollar/yen levels and we could quickly test 103 support.”

On the corporate front, Nintendo shares continued to slide during the session, down 5.45%.

The video games giant reported its earning after markets closed, with an operating loss of JPY 5.13bn in the quarter through June.

Its shares have risen sharply on the back of the success of mobile game Pokemon Go, which was launched after the quarter ended, though they have sold off in recent sessions after Nintendo said the wildly popular game would have a limited impact on its books.

Itochu slipped 6.3% after Glaucus Research Group alleged in a note that the trading house “will be embroiled in an accounting scandal as large as Toshiba”.

“We believe that Itochu overstated fiscal year 2015 net profits by inappropriately reclassifying its stake in a Colombian coal mining joint venture to intentionally avoid taking a 153 billion yen impairment when the value of the investment had declined significantly,” Glaucus wrote.

Itochu issued a short statement in response, claiming it followed proper accounting practices and that it vehemently disagrees with the Glaucus note.

On the mainland, the Shanghai Composite was down 1.94% at 2,991.12, while the Shenzhen Composite lost 4.44% to 1,953.98.

In Korea, the Kospi was off 0.11% at 2,025.05, while in Hong Kong the Hang Seng Index added 0.4% to 22,218.99.

Australia’s S&P/ASX 200 added 0.04% by close to finish at 5,539.69, boosted by a 1.72% advance in the materials subindex.

The major miners were ahead, with BHP Billiton adding 3.12%, Fortescue Metals rising 7.04% and Rio Tinto closing 1.89% higher.

Fortescue released its quarterly production results through June before markets opened, with a slight increase in iron ore shipments to 43.4m tonnes, from 42m in the prior quarter.

Cash production costs also reduced during the quarter, down 3% over the quarter and 35% year-on-year to $14.31 per wet metric tonne.

Fortescue said it expects to ship 165m-170m tonnes with cash production costs of $12-$13 per wet metric tonne in fiscal year 2017.

Data from the Australian Bureau of Statistics released during the day showed the consumer price index across all groups rose 0.4% quarter-on-quarter, in line with expectations.

The weighted median CPI rose 1.3% year-on-year, with analysts watching the inflation data closely to gauge the likelihood of further rate cuts from the Reserve Bank of Australia.

In New Zealand, the S&P/NZX 50 lost 0.1% to 7,301.91, led lower by specialty dairy exporter A2 Milk Company, which lost 3.1%.

It was revealed during the day that A2 faces a legal challenge from local food and brewing giant Lion over the science behind its health claims.

A2 has taken Lion to court over Lion’s use of A2 protein claims, according to media reports.

The down under dollars were both weaker against the greenback, with the Aussie retreating 0.36% to AUS 1.3376 per $1 and the Kiwi off 0.23% at NZD 1.4208.