Asia report: Most markets give up gains, Japan inflation slows

Asia-Pacific markets finished with a mixed performance on Tuesday with Hong Kong’s stocks leading the declines, while Japan's Nikkei surrendered most of its earlier gains by the end of trading.

The subdued sentiment followed a pause in Wall Street's rally overnight on Monday.

“Asian investors were more circumspect overnight, with the Nikkei in Japan ending largely flat after testing its own record high once more,” said Interactive Investor head of markets Richard Hunter.

“A higher-than-expected inflation release unnerved investors somewhat, although it remained in line with the central bank’s 2% target and cemented expectations for an exit from negative interest rates in April.

“The weakness of the yen has helped draw international institutional investors to the region in their droves, despite the country just having entered a technical recession and where China is not currently seen as an attractive alternative.”

Markets mixed, most give up gains by end of trading

In Japan, the Nikkei 225 index edged up marginally by 0.02% to reach 39,239.52, while the Topix index also saw a modest increase of 0.18% to settle at 2,678.46.

Leading the gainers on Tokyo’s benchmark was Hitachi Zosen, which surged by 8.69%, followed by Yaskawa Electric, up by 6.04%, and Otsuka Holdings, climbing by 5.23%.

In mainland China, the Shanghai Composite rose 1.29% to 3,015.48, while the Shenzhen Component index recorded a more substantial increase of 2.24% to 9,269.57.

Standout performers in Shanghai included Hanma Technology Group, up by 10.09%, and Fujian Aonong Biological Technology Group, which saw an increase of 10.05%.

Hong Kong's Hang Seng Index advanced 0.94% to 16,790.80, led by Li Auto, soaring by 25.45%, SMIC, up by 10.21%, and BYD Co, which climbed by 5.32%.

In South Korea, the Kospi index experienced a decline of 0.83% to 2,625.05.

Notable losers in Seoul included Hybe, down by 7.13%, and SK Hynix, which retreated by 4.94%.

Australia's S&P/ASX 200 index posted a modest gain of 0.13% to close at 7,663.00, with Reece emerging as a significant gainer, soaring by 18.31%, along with Wisetech Global, which climbed by 7%.

Across the Tasman Sea, New Zealand’s S&P/NZX 50 index saw a slight dip of 0.13% to 11,694.60.

Notable decliners in Wellington included Ryman Healthcare, slipping by 3.26%, and NZX, which saw a decrease of 2.97%.

In currency markets, the dollar was last down 0.29% on the yen to trade at JPY 150.27, while it dipped 0.12% against the Aussie to AUD 1.5271.

Conversely, the greenback saw a modest increase of 0.18% on the Kiwi to change hands at NZD 1.6229.

On the oil front, Brent crude futures were last up 0.05% on ICE at $82.57 per barrel, while the NYMEX quote for West Texas Intermediate saw a slight uptick of 0.04% to $77.61.

Consumer inflation slows in Japan in January

In economic news, Japan's core consumer prices came in at a slower pace of growth in January compared to the prior year.

According to fresh data, the country’s core consumer price index (CPI) rose by 2% in January from the same period a year earlier.

Japan's core CPI includes oil products, but excludes volatile fresh food prices from its calculation.

The increase fell slightly short of expectations, after a Reuters poll forecast a 1.8% year-over-year increase, making the actual reading a tad higher.

It did, however, align with the Bank of Japan's target of achieving a 2% inflation rate.

“The Bank of Japan (BoJ) will probably be more confident to normalise rates after seeing this inflation release,” said Kelvin Lam at Pantheon Macroeconomics.

“But the key question still lies in whether a tighter labour market, particularly in services, will bid up wage growth in the wider economy.

“All eyes are now on the outcome of the upcoming spring wage negotiation - Shuntō - for large corporations, due in mid-March.”

Lam said the rhetoric from the BoJ had been consistent in recent weeks, pointing to imminent rate normalisation in the second quarter.

“In particular, governor [Kazuo] Ueda said last Thursday that ‘signs have been observed that businesses are becoming more active when deciding wages as labour demand tightens’ and that he expects ‘a virtuous economic cycle in which inflation rises gradually with an increase in wages and employment will strengthen’.

“We continue to expect the BoJ to use Shuntō as a pretext and remove the negative rate policy in the second quarter, even though economic and inflation data probably won’t fully justify policy tightening.

“With the Fed most probably delaying its first interest rate cut until May, the BoJ will likely tighten by June at the latest.”

Reporting by Josh White for Sharecast.com.