Asia report: Markets mixed on quiet day for regional trading

Asia-Pacific markets were mixed on Tuesday, with trading impacted by public holidays in a number of key markets, as well as the cautious tone set by US Federal Reserve chair Jerome Powell overnight.

Powell signalled that recent large rate cuts should not be seen as indicative of future aggressive actions by the Fed.

“Asian stock markets are trading mostly higher on Tuesday in thin trade, buoyed by the positive performance of Wall Street overnight,” said Patrick Munnelly at TickMill Group.

“The Japanese stock market has bounced back from the significant declines in the previous trading session, with the Nikkei 225 index now trading well above the 38,500 level.

“The yuan remained unchanged at seven per dollar in offshore trading, with Chinese markets closed and holidays in Hong Kong and South Korea further reducing activity in the Asian session.”

Munnelly noted that the three US benchmark stock indices finished Monday higher thanks to a late-day end-of-quarter rally in stocks.

“Following Fed Chair Powell's speech, the market initially fell sharply but quickly recovered as investors saw a decrease in the likelihood of a 50 basis point cut in November.

“Powell reiterated his previous position, saying there is no need to rush to lower rates because labour conditions are good and choices will be made meeting-by-meeting using data.

“Rate cuts in November and December now have lower futures pricing - 34bps and 70bps, respectively - than they had earlier.”

Bourses mixed on quiet trading day for region

In Japan, the Nikkei 225 jumped 1.93% to close at 38,651.97, while the Topix index gained 1.69%, reaching 2,690.78.

Fresh survey data showed sentiment among large non-manufacturers in Japan improving, while optimism among major manufacturers remained steady.

Leading the gains on Tokyo’s benchmark were Kawasaki Heavy Industries, which jumped 8.3%, Mitsubishi Heavy Industries, up 7.84%, and Japan Steel Works, which rose 7.74%.

Markets in mainland China, Hong Kong, and South Korea were closed for public holidays, limiting regional activity.

Australia’s S&P/ASX 200 dropped by 0.74% to 8,208.90, driven down by a decline in mining stocks.

De Grey Mining fell 4.32%, Fortescue dropped 3.48%, and Westgold Resources declined 3.37%.

New Zealand's S&P/NZX 50 managed gains of 0.35% to 12,466.69.

Leading the charge in Wellington were KMD Brands, up 8.16%, Synlait Milk with a 5.13% gain, and Sky Network Television, which added 5.02%.

In currency markets, the dollar was last up 0.11% on the yen to trade at JPY 143.79, as it gained 0.03% against the Aussie to AUD 1.4469, and advanced 0.51% on the Kiwi, changing hands at NZD 1.5832.

Oil prices fell, with Brent crude futures last down 1.6% on ICE at $70.32 per barrel, and the NYMEX quote for West Texas Intermediate slipping 1.8% to $66.94.

Japan business sentiment relatively stable in last quarter

In economic news, traders in the region were focussed on the Bank of Japan's third-quarter Tankan survey, a key indicator of business sentiment.

Optimism among large manufacturers remained steady at +13, consistent with the previous quarter and in line with market expectations.

Sentiment among large non-manufacturers showed a slight improvement, rising to +34 from +33 in the second quarter, exceeding analysts' forecasts of +32.

The figures suggested that optimism continues to outweigh pessimism in both sectors.

In a further sign of economic improvement, Japan’s unemployment rate for August fell to 2.5%, down from 2.7% in July, and below the anticipated 2.6%.

Additionally, the Bank of Japan released its summary of opinions from its late September policy meeting.

During the meeting, the central bank opted to keep its benchmark interest rate unchanged, despite a recent rate cut by the US Federal Reserve.

The summary revealed that at least one board member expressed concern that raising rates could signal the start of a full tightening cycle, which was deemed premature.

Another member argued that Japan’s economy was not in a position where delaying rate hikes would pose a risk, emphasising the importance of stability in financial markets.

Reporting by Josh White for Sharecast.com.