Asia report: Markets rise as Chinese inflation paints mixed picture

Asia-Pacific stocks closed on a high note on Monday, as investors processed the latest inflation figures out of China and gained confidence from a strong performance on Wall Street.

All three major stock indices in the United States closed in the green overnight, buoying investor sentiment.

“Asian markets were mostly positive, with the Nikkei rebounding strongly after a previously weak session,” said Interactive Investor head of markets Richard Hunter.

“The index is close to the highs which it achieved over recent days, pushing the Japanese market to levels not seen since 1990.”

Hunter noted that there was also a tick higher in China, despite economic data throwing more cold water on the demand story.

“The economy had a good first quarter following the reopening, but has subsequently stalled with recently weak import and export numbers being followed by a fall in factory gate prices, with faltering demand weighing on the manufacturing sector.”

Stock markets rise across the region

In Japan, the Nikkei 225 jumped by 1.97% to close at 32,265.17, while the broader Topix index was also up by 1.5%, ending at 2,224.32.

Shares of Konami surged by 5.77%, followed by Marubeni and Fast Retailing, each rising by 4.62% and 4.6% respectively.

Chinese indices, the Shanghai Composite and Shenzhen Component, posted gains of 0.55% and 0.66% to finish at 3,231.41 and 10,793.93, respectively.

Aeolus Tyre and Beijing Teamsun Tech led the market rally in Shanghai, with each stock jumping by 10.09% and 10.05%.

Hong Kong's Hang Seng Index closed 0.47% higher at 19,389.95, with Chow Tai Fook Jewellery, WuXi Biologics, and China Resources Beer climbing by 3.62%, 2.99%, and 2.91%, respectively.

South Korea's Kospi advanced by 1.16% to end at 2,641.16, driven by gains in Doosan Heavy Industries and SK Hynix, which were up by 5.92% and 5.2% respectively.

Australia's S&P/ASX 200 index inched up 0.32% to close at 7,122.50, with Nickel Industries and Champion Iron leading the gains, up 13.3% and 4.47% respectively.

However, New Zealand's S&P/NZX 50 index bucked the trend, slipping by 0.22% to finish at 11,690.34.

Eroad and Mercury NZ were the major laggards on Wellington’s bourse, down by 2.41% and 2.35%.

In currency markets, the yen was last 0.51% weaker to trade at JPY 139.63, while the Aussie was virtually flat, strengthening just 0.01% on the dollar to AUD 1.4889.

The Kiwi remained unchanged against the greenback, changing hands at NZD 1.6407.

In energy markets, Brent crude futures were last up 0.49% on ICE at $76.33 per barrel, and the NYMEX quote for West Texas Intermediate rose 0.48% to $71.63.

China inflation figures paint a mixed picture

In economic news, China’s consumer price index (CPI) rose 0.2% year-on-year in May, marginally recovering from a two-year low of 0.1% set in April.

However, the rise in prices was less than anticipated, with economists polled by Reuters having forecast a 0.3% increase.

On a month-on-month basis, prices dropped by 0.2%, slightly exceeding the predicted decline of 0.1%.

China continued to grapple with producer deflation in May, however, with the official producer price index (PPI) tumbling 4.6% for the month, marking the steepest drop since June 2016.

The decline further deepened from April's figure of -3.6%, surpassing the anticipated 4.3% drop pencilled in by economists surveyed by Reuters.

“We think producer prices will continue to drop this year, as China is unlikely to carry out a big stimulus,” said Pantheon Macroeconomics chief China economist Duncan Wrigley.

“Policymakers probably will deploy targeted fiscal, quasi-fiscal and monetary support as well as symbolic broad rate cuts to prop up growth. But China has set a relatively modest ‘about 5%’ growth target for this year, making all-out stimulus highly improbable, while structural issues such as labour market weakness, property developer debt issues and private business troubles will hold back the pace of private sector recovery.”

On the other side of the South China Sea, the Philippines saw its trade deficit narrow in May to $4.53bn, from $4.93bn in the prior month.

However, both exports and imports contracted considerably year-on-year when compared to April last year.

Exports in the country experienced a steep 20.2% plunge in May, a significant acceleration from the 9.1% fall seen in March.

Imports also saw a sharp decrease, falling 17.7% compared to the same month a year ago, marking a notable hastening from the 2.7% drop seen in March.

Reporting by Josh White for Sharecast.com.