Asia report: Most markets rise as US inflation cools

Stock markets in Asia were mostly in the green as they closed on Wednesday, as investors cheered a cooler-than-expected consumer inflation print out of the United States overnight.

In Japan, the Nikkei 225 was up 0.72% at 28,156.21, as the yen strengthened 0.46% on the dollar to last trade at JPY 134.97.

Automation specialist Fanuc was up 0.7%, fashion firm Fast Retailing added 0.07%, and technology conglomerate SoftBank Group advanced 0.48%.

The broader Topix index was 0.6% firmer by the end of trading in Tokyo, closing at 1,977.42.

Sentiment at large manufacturers weakened further in the fourth quarter, according to the closely-watched Tankan survey by the Bank of Japan.

The headline index of sentiment among large manufacturers declined to 7 from a previous 8, while small manufacturer outlook improved to 02 from -4 quarter-on-quarter.

Looking at inflation, firms in Japan were expecting annual price rises to stand at 2.7% in one year, 2.2% in three years, and 2% in five years’ time.

“The Bank of Japan is likely to be unmoved by the Tankan survey, especially given the poor sentiment among Japanese manufacturers,” said Duncan Wrigley at Pantheon Macroeconomics.

“A particular worry is that large manufacturers forecast employment conditions at -15 in the first quarter of 2023, down from -14 in the fourth quarter of 2022.

“The Bank has repeatedly stated that it will be looking for wage growth, alongside sustainable consumer inflation, and this points in the opposite direction, at least for these key businesses.”

Wrigley reckoned the BoJ would be monitoring China’s progress in exiting from strict Covid policy as a key indicator for Japanese manufacturers.

“China’s reopening is likely to make meaningful progress from the second quarter of 2023, even though it will no doubt be a bumpy ride.”

On the mainland, the Shanghai Composite eked out gains of 0.01% to 3,176.53, and the technology-heavy Shenzhen Component slipped 0.02% to 11,321.81.

South Korea’s Kospi jumped 1.13% to 2,399.25, while the Hang Seng Index in Hong Kong advanced 0.39% to 19,673.45.

The blue-chip technology stocks were mixed in Seoul, with Samsung Electronics up 1.34%, while SK Hynix slipped 0.61%.

Sentiment in the region was given a boost early in the Asian day, after the consumer price index in the US rose less than anticipated in November.

Inflation was at 7.1% year-on-year in November, less than the 7.3% economists had pencilled in.

Stripping out volatile food and energy prices, inflation was 6% year-on-year, slightly below the 6.1% markets were anticipating.

Oil prices were higher at the end of the Asian day, with Brent crude futures last up 0.63% on ICE at $81.19 per barrel, while the NYMEX quote for West Texas Intermediate was ahead 0.69% at $75.91.

In Australia, the S&P/ASX 200 gained 0.67% to 7,251.30, as the hefty financials subindex was 0.1% firmer.

The big four banks were mixed, however, with Commonwealth Bank up 0.45%, while Australia and New Zealand Banking Group slipped 0.37%, National Australia Bank lost 0.26%, and Westpac was 0.38% weaker.

Across the Tasman Sea, New Zealand’s S&P/NZX 50 slipped 0.14% to 11,585.00, after the Treasury in Wellington said in its half-year fiscal update that it was expecting the country to enter a recession in 2023.

“While the precise timing is uncertain, our base case is that real GDP growth is forecast to slow materially through 2023, with a contraction of 0.8% over the three quarters to end 2023 before a slow, gradual recovery in 2024 and beyond,” the report read.

Consumer demand was also set to take a hit, after the government confirmed that the current 25-cent-per-litre fuel and 50% public transport subsidies - enacted in the wake of Covid-19 lockdowns to reignite activity - would come to an end on 31 March.

The down under dollars were in a mixed state against the greenback, with the Aussie last 0.06% stronger on AUD 1.4579, while the Kiwi weakened 0.36% to NZD 1.5525.

Reporting by Josh White for Sharecast.com.