Asia report: Mixed signals send markets lower

Most Asian markets ended Wednesday lower, with mixed signals coming from Chinese and Australian economic data.

In Japan, the Nikkei 225 finished down 1.62% at 16,955.73, dragged down by a higher yen and reports during the session that Prime Minister Shinzo Abe was likely to delay a planned 2017 sales tax rise until 2019.

“If Japan's government has decided to delay the consumption tax increase scheduled for April 2017 as reports indicate, it would undermine the credibility of the political commitment to fiscal consolidation,” said a Fitch Ratings note on the matter.

The agency said it was waiting for further information on the country’s fiscal plans going forward before making any comment on its ratings for Japan.

That information was indeed forthcoming after markets closed, with Abe making a speech and holding a press conference that was ongoing at the time of writing.

In his speech, the Prime Minister said the global economy was still facing big risks, though his ‘Abenomics’ had been improving the domestic economy in terms of job numbers and bankruptcies, before stressing that risks from China were still increasing at speed.

He confirmed the sales tax hike delay until 2019, and said his entire toolbox - including structural reforms - would be used, though he didn’t mention monetary easing.

Abe also spoke of a significant investment into high-speed rail as a focus of his stimulus.

As the press conference continued, the yen was 0.99% stronger at JPY 109.63 per USD.

Shares in Softbank bucked the trend on Tokyo, however, closing up 0.39% after it announced plans to sell $7.9bn in US-listed Alibaba shares in a bid to improve its leverage ratio.

Such a move would see its stake in the China-based online marketplace reduce to 28% from a current 32%.

Across on the mainland, the Shenzhen Composite was ahead by 0.76% to close at 1,886.51.

Beijing released its official non-manufacturing PMI during the day, which slipped to 53.1 in May against 523.5 in April.

The unofficial Caixin China manufacturing PMI also fell to 49.2, from an April reading of 49.4, missing a forecast of 49.3.

“The PMI readings for May were underwhelming. They suggest that activity held up reasonably well last month, but they also offer few signs of improvement,” said Capital Economics China economist Julian Evans-Pritchard in a note.

In Hong Kong, the Hang Seng Index fell 0.26% to close at 20,760.98, while in South Korea, the Kospi was just off flat, nudging a 0.03% downwards movement to close at 1,982.72.

A 3.17% gain for the lofty Samsung Electronics likely underpinned the benchmark.

Oil was down after Asian markets closed, with Brent crude last losing 1.7% at $49.06 per barrel and West Texas Intermediate off 1.51% at $48.37.

Traders were staging a wait-and-see for any news from an OPEC meeting in Vienna on Thursday, though expectations for any output deal were low.

A report from Reuters quoted United Arab Emirates Oil Minister Suhail bin Mohammed al-Mazroui as saying he was satisfied with the current crude market, pointing to the recent rise in oil prices.

In Australia, the S&P/ASX 200 finished down 1.03% at 5,323.20, paring back some losses after the release of some seriously positive GDP data.

Most of the benchmark’s subindexes remained in losses, with the weighty financials group down 1.09% and energy losing 1.77%.

Woodside Petroleum was among the big losers, falling 1.79%.

Ailing airline Virgin Australia added 1.67% after news that China’s HNA Aviation would take a 13% stake in the carrier for AUD 159m.

The country’s gross domestic product came in significantly above forecasts during the session, with a 3.1% rise year-on-year against a Reuters-polled 2.8% consensus expectation.

Despite the positive mood, interest rate cuts were still on the cards according to some local analysts, with inflation still very low and the GDP growth largely driven by exports.

After the data release, the Aussie dollar surged and was last trading 0.35% stronger at AUD 1.3778 to the greenback.

In New Zealand, the benchmark S&P/NZX 50 lost 0.2% to close at 7,022.33, with Steel & Tube among the leading losers, slipping 1% after revelations that its recent earnings guidance included the impact of faulty Chinese steel used on major highway work was too weak to hold the road, and now required serious repair work.

Air New Zealand lost 1.33%, with the Virgin Australia news proving a triple-headed beast for the airline.

The deal between the Australian airline and HNA Aviation will dilute Air NZ’s stake as the largest shareholder to less than 23% from 26%, would make its shares in Virgin harder to sell as it could no longer look to HNA competitors such as China Southern, and will likely divert Virgin’s focus from the lucrative and highly competitive trans-Tasman Sea market, where the two carriers codeshare, analysts pointed out.

It was bad news for exporters in the shaky isles too, with the Kiwi surging ahead 0.62% to last stand at NZD 1.4695 per USD.