Asia report: Most markets fall on interest rate concerns

Asia-Pacific markets started the holiday-shortened week with a mixed performance on Monday, as concerns around the possibility of higher interest rates being maintained for longer lingered.

Patrick Munnelly, market analyst at TickMill, said stocks in the region were subdued due to a “red-hot” non-farm payrolls report in the US on Friday, and Federal Reserve chair Jerome Powell's comments indicating a likely delay to a March rate cut.

“In a pre-recorded television interview aired last night, Powell reiterated that more progress on inflation’s final descent was needed before the central bank would cut rates, aligning with comments made at last week’s policy meeting press conference.

“Powell also indicated that the scale of cuts priced in by financial markets seemed excessive relative to the Fed’s own expectations, while suggesting that the first cut would not occur until the middle of the year.”

Munnelly noted that the Nikkei 225 was supported by recent currency weakness, with earnings influencing the biggest movers.

“The Hang Seng and Shanghai Composite initially faced pressure from a continuation of the equity rout, but Chinese markets later recovered from their lows.”

Stocks in Japan rise, rest of region closes in the red

In Japan, the Nikkei 225 index gained 0.54%, closing at 36,354.16, while the Topix index also saw an uptick of 0.67%, reaching 2,556.71.

Leading gainers on Tokyo’s benchmark included Seiko Epson, surging by 10.42%, Chiyoda with an 8.01% increase, and Pacific Metals, rising by 7.19%.

Meanwhile, in China, the Shanghai Composite dipped 1.02% to close at 2,702.18, and the Shenzhen Component declined by 1.13% to reach 7,964.71.

Harbin Xinguang Optic Electronics and Guangzhou Fangbang Electronics both experienced significant losses in Shanghai, dropping by 17.12% and 17.1%, respectively.

Hong Kong's Hang Seng Index slipped 0.15%, closing at 15,510.01, led lower by Longfor Properties, down 4.14%, followed by Hang Lung and Chow Tai Fook Jewellery Group, declining by 3.72% and 3.27%, respectively.

In South Korea, the Kospi fell 0.92% to close at 2,591.31, with SK IE Technology experiencing a notable drop of 10.79%, and KakaoBank declining by 6.14%.

Australia's S&P/ASX 200 index also faced a downturn, dropping 0.95% to close at 7,625.90.

Notable losers in Sydney included Liontown Resources, down 8.21%, and Ramelius Resources, which declined by 7.48%.

New Zealand's S&P/NZX 50 index had a relatively stable day, with a marginal dip of 0.02% to close at 11,928.70.

Fletcher Building and Pacific Edge were among the companies facing losses in Wellington, with declines of 6.61% and 5%, respectively.

In currency markets, the dollar was last 0.07% stronger on the yen, trading at JPY 148.48.

The greenback also saw a slight uptick of 0.19% against the Aussie, reaching AUD 1.5385, while it increased 0.05% on the Kiwi to change hands at NZD 1.6497.

In oil markets, Brent crude futures were last down 0.34% on ICE to reach $77.07 per barrel, and the NYMEX quote for West Texas Intermediate fell 0.46% to close at $71.95.

Raft of data paints mixed picture across region

In economic news, the slowdown in Australia's business activity looked to have eased in January.

The Judo Bank services purchasing managers’ index (PMI) rose to 49.1 in January, a notable improvement from the 47.1 recorded in December.

That upturn was attributed to stabilising demand and a shallower decline in export business, resulting in only a marginal decrease in services activity for the month.

Moving to Japan, the au Jibun Bank Japan services business activity index for January climbed to 53.1 from December's 51.5, signifying continued expansion in the sector, with the growth rate reaching its highest point since September.

The survey highlighted the rise in new business inflows and the resurgence of international demand for the first time in five months.

In China, the services sector maintained its expansion streak for the 13th consecutive month in January.

Caixin's private survey reported a services PMI of 52.7, albeit slightly lower than December's 52.9.

The dip was attributed to a softer growth rate in new orders, but the survey noted that employment increased for the second month in a row, and companies expressed optimism about the 12-month outlook for services activity.

“Overall, we think the mixed picture from the Caixin and the National Bureau of Statistics measures highlights the regionally uneven nature of China’s recovery,” said Pantheon Macroeconomics senior China economist Kelvin Lam.

“Despite more stimulus being deployed this year, we only expect a soft and gradual recovery in domestic demand in 2024, as households are beset by weak confidence, tepid income growth and poor economic prospects.

“While consumer and business confidence is linked to the health of the property and equity markets, we don’t expect confidence to be fully restored until these markets improve materially.”

Finally on data, Hong Kong experienced a marginal contraction in business activity for January following two consecutive months of expansion.

S&P Global's PMI for the special administrative region came in at 49.9, down from December's 51.3.

The decline was primarily due to a decrease in new business demand during January.

Output continued to expand as firms worked through their existing orders, providing a mixed picture of Hong Kong's economic performance.

Reporting by Josh White for Sharecast.com.