Asia report: Markets mostly lower amid slew of Japan data

Asia-Pacific markets closed mostly lower on Wednesday, with mainland China stocks being the exception, showing slight gains following a series of economic data releases from Japan.

Japanese markets fell despite a marginal improvement in business sentiment.

New Zealand’s central bank was also in focus, as it held interest rates and indicated that a rate cut was still not on the immediate horizon.

“The [Reserve] Bank reiterated confidence on getting inflation back within the 1% to 3% band by the end of this year, but the Bank views the risk to this forecast as lying to the upside, primarily from elevated non-tradables inflation and a less negative output gap,” said TD Securities.

Markets mostly lower across the Asia-Pacific region

In Japan, the Nikkei 225 dropped by 0.85% to close at 38,617.10, while the Topix index declined by 0.81% to 2,737.36.

Notable losers on Tokyo’s benchmark included Tokyo Gas, which plummeted by 5.24%, Ebara, which fell 5%, and Chugai Pharmaceutical, which decreased by 3.77%.

Contrastingly, Chinese markets showed resilience, as the Shanghai Composite edged up by 0.02% to 3,158.54, and the Shenzhen Component rose by 0.12% to 9,693.06.

Leading the gains in Shanghai were Guosheng Shian Technology and Anzheng Fashion Group, both surging over 10%.

Hong Kong's Hang Seng Index slightly decreased by 0.13% to 19,195.60.

Significant decliners included Link Real Estate Investment Trust, down 4.4%, NetEase, falling 3.22%, and Hansoh Pharmaceutical Group, which dropped by 2.93%.

South Korea's Kospi index experienced a marginal decline of 0.03%, closing at 2,723.46.

Samsung Fire & Marine Insurance fell sharply by 8.02%, and DB Insurance was down by 5.81%.

In Australia, the S&P/ASX 200 index slipped by 0.05% to 7,848.10, as Eagers Automotive saw a significant drop of 15.01%, and Genesis Energy decreased by 4.74%.

New Zealand's S&P/NZX 50 bucked the regional trend, gaining 0.48% to close at 11,732.28.

Pacific Edge and SkyCity Entertainment Group led the gains, rising by 5.26% and 4.55%, respectively.

In currency markets, the dollar was last 0.17% stronger on the yen to trade at JPY 156.43, while it increased 0.08% against the Aussie to AUD 1.5015.

The greenback meanwhile fell 0.36% on the Kiwi to change hands at 1.6357.

Oil prices declined, with Brent crude futures last down 1.48% on ICE at $81.65 per barrel, while the NYMEX quote for West Texas Intermediate (WTI) fell 1.51% to $77.47.

Slew of data released in Japan, RBNZ keeps rates on hold

In economic news, business sentiment among large Japanese firms saw a slight improvement in May, according to the latest Reuters Tankan survey.

The sentiment index for manufacturers remained stable at +9, the same as in April, while the non-manufacturing index edged up to +26 from +25.

A positive index indicates a majority of optimists within the sector.

Meanwhile, Japan's exports in April rose 8.3% year-on-year, surpassing the 7.3% growth seen in March but falling short of the 11.1% forecast by economists polled by Reuters.

Exports to China increased by 9.6%. Imports also grew by 8.3% compared to the previous year.

The country’s trade balance recorded a deficit of JPY 462.5bn, larger than the predicted deficit of JPY 339.5bn.

In another positive sign for Japan's economy, machinery orders increased by 2.7% year-on-year, exceeding the expected 2.3% rise.

On a month-on-month basis, core machinery orders climbed by 2.9%, contrary to forecasts of a 2.2% decline.

Core machinery orders, though volatile, are a crucial indicator of capital expenditure.

However, Japan's Cabinet Office forecast a 1.6% decline in core orders for the April to June period, following a 4.4% increase in the first quarter of the year.

Elsewhere, the Reserve Bank of New Zealand (RBNZ) kept its official cash rate unchanged at 5.5% for the seventh consecutive time.

Inflation in New Zealand fell from 4.7% in the last quarter of 2023 to 4% in the first quarter of 2024, yet it remained above the RBNZ’s target range of 1% to 3%.

The RBNZ committee emphasised that monetary policy needed to stay restrictive to ensure inflation returned to target within a reasonable timeframe.

“The board did discuss the possibility of hiking the OCR at today's meeting but refrained from doing so given more confidence that inflation will decline to within the target range over the medium term,” said TD Securities senior Asia-Pacific rates strategist Prashant Newnaha.

“Today's announcement reaffirms the 'higher for longer' mantra.

“Our call remains for the RBNZ to begin its easing cycle at its May 2025 meeting, but if the RBNZ's forecasts for growth and wages are correct, the risks are tilted toward the RBNZ cutting earlier, in February 2025.”

Reporting by Josh White for Sharecast.com.