Asia report: Most markets rise as Japan's economy unexpectedly shrinks

Asia-Pacific markets mostly rebounded on Thursday, with Japan's benchmark index closing above 38,000 points for the first time since 1990.

That came despite the country entering a technical recession, as Japan’s GDP contracted for a second consecutive quarter.

“Asian equities, particularly chip stocks, drove the rise in Asian markets on Thursday,” said TickMill market analyst Patrick Munnelly.

“The Nikkei reached a new 34-year peak, while the dollar paused near a three-month high as investors evaluated the potential timing of the Federal Reserve's easing cycle.

“The MSCI's broadest index of Asia-Pacific shares outside Japan increased by 0.7%, with the IT index surging by almost 3%.”

Munnelly added that stocks in Taiwan also surged to a record high, led by an almost 8% increase in chipmaker TSMC's stock.

Japan leads risers on day filled with gains

In Japan, the Nikkei 225 surged by 1.21% to reach 38,157.94 points, while the Topix index rose by 0.28% to 2,591.85 points.

Leading the rise on Tokyo’s benchmark was Mitsui Engineering & Shipbuilding with a gain of 18.61%, followed by Ebara and Rakuten with increases of 15.97% and 15.82%, respectively.

Mainland China's markets remained closed for the country’s extended Lunar New Year holiday.

Hong Kong's Hang Seng Index saw a modest increase of 0.41%, closing at 15,944.63 points.

Li Ning Co led the gains with a rise of 5.58%, followed by JD.com and Lenovo Group with increases of 2.41% and 2.21%, respectively.

South Korea experienced a slight decline, with the Kospi index slipping by 0.25% to 2,613.80 points.

GS Holdings faced a significant setback of 5.52%, while Lotte and Daewoong followed suit with declines of 4.89% and 4.24%, respectively.

Australia's S&P/ASX 200 index managed to buck the trend, posting a gain of 0.77% to reach 7,605.70 points.

Noteworthy gainers included Altium, surging by 28.76%, Goodman Group up by 7.03%, and BSP Financial Group with a gain of 6.4%.

In New Zealand, the S&P/NZX 50 index experienced a marginal decrease of 0.18%, settling at 11,640.04 points.

Leading the decliners in Wellington was Fletcher Building, down by 7.2%, followed by Skellerup Holdings slipping by 6.46%, and Eroad with a decline of 4.55%.

On the currency front, the dollar was last down 0.35% on the yen, trading at JPY 150.04. The greenback was also weaker against its Aussie and Kiwi counterparts, falling 0.12% against the former to AUD 1.5387, and losing 0.1% on the latter to change hands at NZD 1.6414.

In energy markets, Brent crude futures were last down 0.75% on ICE at $80.99 per barrel, while the NYMEX quote for West Texas Intermediate declined 0.81% to $76.02.

Japan enters technical recession, Australian unemployment rises

In economic news, fresh government data out of Japan revealed an unexpected contraction in the economy in the final quarter of 2023.

The provisional gross domestic product (GDP) shrank by 0.4% compared to the same period a year ago, following a revised 3.3% decline in the prior quarter.

That fell short of the 1.4% growth forecast in a Reuters poll.

Moreover, Japan experienced a quarter-over-quarter contraction of 0.1%, marking a slight improvement from the revised 0.8% decline in the preceding quarter.

“Technical recession might have hit the headlines, but it masks the underlying improvements seen in most of the components in today’s report, albeit marginally,” said Kelvin Lam at Pantheon Macroeconomics.

“The results from the Spring wage negotiation for large corporates on 15 March remains pivotal to Bank of Japan’s policy decision, and we continue to expect the Bank to use that 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.

“Having said that, the BoJ will likely keep its policy accommodative after the Bank ends the negative rate policy as deputy governor Uchida highlighted in a speech he gave last week.”

Meanwhile, employment figures in Australia for January revealed a stark contrast to expectations.

The country added a mere 500 jobs during the month, significantly below the Reuters forecast of a 30,000 increase.

At the same time, the unemployment rate in Australia rose to 4.1% from 3.9% in December, surpassing the 4% expectation in the Reuters poll.

On a more positive note, the labour participation rate remained steady at 66.8%.

Reporting by Josh White for Sharecast.com.