Asia report: Most markets close weaker, RBNZ cuts stimulus

Markets in Asia closed mostly lower on Wednesday, as investors digested the latest inflation data out of the United States, while New Zealand’s central bank announced a cut to its current stimulus measures.

In Japan, the Nikkei 225 was down 0.38% at 28,608.49, as the yen strengthened 0.15% on the dollar to last trade at JPY 110.46.

Of the major components on the benchmark index, automation specialist Fanuc was down 1.82%, fashion firm Fast Retailing lost 0.43%, and technology conglomerate SoftBank Group was off 0.12%.

The broader Topix index was off 0.23% by the end of trading in Tokyo, closing at 1,963.16.

On the mainland, the Shanghai Composite was down 1.07% at 3,528.50, and the smaller, technology-heavy Shenzhen Composite was 0.88% weaker at 2,470.07.

South Korea’s Kospi was 0.2% lower at 3,264.81, while the Hang Seng Index in Hong Kong lost 0.63% to 27,787.46.

The blue-chip technology stocks were mixed in Seoul, with Samsung Electronics down 0.38%, while SK Hynix rose 0.41%.

Investors were met with fresh inflation data out of the US early in the Asian session, which showed consumer prices growing at their hastiest cadence in more than 12 years.

According to the Labor Department, consumer inflation rocketed 5.4% year-on-year in June, making for the highest growth rate since August 2008.

RaboResearch US economist Philip Marey noted that the jump in the consumer price index was attributable to much of the same supply-driven factors, as evidenced by the fact that used car sale prices accounted for more than one-third of the increase in the headline reading, rising by 10.5% in June.

“Indeed, insofar as these raising pressures are of a cost-push variety, as is arguably the case, then this only serves to strengthen the notion of inflation proving fleeting,” RaboResearch said.

“Absent a broad-based response on the part of wages, which we do not expect, this is likely to squeeze real incomes thereby weighing on demand and proving disinflationary further down the line.”

Oil prices were on the back foot at the end of the day in the region, with Brent crude last down 0.5% at $76.11 per barrel, and West Texas Intermediate losing 0.72% to $74.71.

In Australia, the S&P/ASX 200 was the region’s odd one out, rising 0.31% to 7,354.70, as the hefty financials subindex managed gains of 0.1%.

The big four banks closed mixed in the sunburnt country, with Commonwealth Bank of Australia up 0.4% and National Australia Bank eking out gains of 0.08%, while Australia and New Zealand Banking Group was down 0.61% and Westpac Banking Corporation lost 0.24%.

Across the Tasman Sea, New Zealand’s S&P/NZX 50 lost 0.51% to close at 12,719.68, after the country’s central bank confirmed it would be cutting its current monetary stimulus measures.

The Reserve Bank of New Zealand said additional asset purchases being made under its Large-Scale Asset Purchase Programme would end by 23 July.

That led to some action in the country’s bond market, with the yield on the 10-year Kiwi Bond government security rising more than seven basis points, while local markets were now apparently pricing in a 50% chance for a hike in the bank’s official cash rate in August.

“Members agreed that the major downside risks of deflation and high unemployment have receded,” the official report of the meeting read.

“The committee agreed that a ‘least regrets’ policy now implied that the significant level of monetary support in place since mid-2020 could be reduced sooner, so as to minimise the risk of not meeting its mandate.”

The down under dollars painted a mixed picture against the greenback, with the Aussie last 0.09% weaker at AUD 1.3441, while the Kiwi strengthened 0.72% to NZD 1.4292.