Asia report: Markets rise as Aussie surveys show mixed economic sentiment

Asia-Pacific markets experienced notable gains on Tuesday, buoyed by positive performances on Wall Street overnight, where the S&P 500 and Nasdaq Composite closed at record highs.

Investors were looking ahead to the upcoming US consumer price index release, as a hint to the direction the Federal Reserve might take with interest rate decisions.

“Japanese stocks, particularly semiconductor-related shares, led gains in Asia following their US counterparts,” said TickMill market analyst Patrick Munnelly.

“The Nikkei 225 Stock Average set a new record, with a year-to-date gain of over 23%.

“Australian equity indices and US stock futures surged, while the S&P 500 closed 0.1% higher on Monday.”

Munnelly noted that information technology shares were the largest contributors to gains in the MSCI Asia Pacific Index, with sentiment around stocks with high exposure to AI being the most elevated since 2019.

“In China, markets are sceptical about the central bank's fresh liquidity operations announced on Monday, and investors are also looking ahead to a major annual policy summit next week.

“The Bank of Japan is set to have key meetings aimed at gauging a realistic pace for a reduction of its bond purchases to be announced later this month, with increased demand at a Japanese five-year auction despite speculation about the BoJ’s bond buying reduction.”

Most markets finish Tuesday in the green

In Japan, the Nikkei 225 jumped 1.96% to 41,580.17, while the Topix rose 0.97% to 2,895.55, reaching new peaks.

Leading the charge on Tokyo’s benchmark were Fujikura, up 11.37%, Resonac Holdings, which climbed 8.66%, and Kyowa Kirin, increasing by 5.31%.

On the mainland, the Shanghai Composite gained 1.26% to 2,959.37, and the Shenzhen Component increased by 1.68% to 8,705.94.

Gree Real Estate, Grace Fabric Technology, and Shanghai Jin Jiang International Industrial Investment all saw significant rises in Shanghai of over 10%.

The Hang Seng Index in Hong Kong remained nearly flat, dipping slightly by 0.005% to 17,523.23.

Major decliners in the special administrative region included Tingyi, down 4.24%, Li Ning Co, which fell 2.97%, and ANTA Sports Products, decreasing by 2.31%.

In South Korea, the Kospi index advanced by 0.34% to 2,867.38, with notable performers including Doosan Heavy Industries & Construction, up 5.95%, SKC with a 4.32% gain, and Krafton rising by 4.14%.

Australia’s S&P/ASX 200 rose by 0.86% to 7,829.70.

Insignia Financial led the gains with a 13.64% increase, followed by Droneshield at 6.97%, and Liontown Resources up by 5%.

Across the Tasman Sea, New Zealand’s S&P/NZX 50 index climbed 0.87% to 11,848.13, as Eroad gained 5.08%, Skellerup Holdings rose 3.34%, and Goodman Property Trust increased 3%.

In currencies, the dollar was last 0.12% stronger on the yen, trading at JPY 161.02.

The greenback was meanwhile unchanged against the Aussie at AUD 1.4843, while it edged up 0.13% on the Kiwi, changing hands at NZD 1.6346.

In oil markets, Brent crude futures were last down 0.42% on ICE at $85.39 per barrel, as the NYMEX quote for West Texas Intermediate declined 0.51% to $81.91.

Business and household sentiment diverging in Australia

In economic news, fresh surveys on Australia's economic sentiment revealed a stark contrast between household pessimism and rising business confidence.

Households expressed growing concerns over potential interest rate hikes, while businesses showed increased optimism, reaching the highest confidence level since early 2023.

A National Australia Bank (NAB) survey indicated a significant rise in business confidence, which jumped six points to four in June, driven by improvements across all sectors except construction.

Despite the positive sentiment, business conditions, including sales, employment, and profitability, dipped by two points to 4, falling below the long-term average.

NAB’s survey hinted at potential weaknesses ahead, however, with both labour and purchase cost growth easing and output price growth slowing.

Additionally, forward orders remained flat, and capital expenditure fell.

In contrast, a Westpac survey showed consumer sentiment declining by 1.1% from June, dropping to 82.7 points in July.

The index, reflecting the feeling of households, had remained below the 100 mark since March 2022, indicating a predominance of pessimism.

Recent data showed that consumer prices rose more than expected for the third consecutive month in May, raising the likelihood of an interest rate hike.

The Reserve Bank of Australia (RBA) is scheduled to meet on 5 and 6 August, with some economists predicting a possible policy tightening to raise the benchmark rate to 4.6% - a level last seen in October 2011.

The country’s second-quarter inflation report is due on 31 July, ahead of that meeting.

Reporting by Josh White for Sharecast.com.