Asia report: Most markets weaker after EU stimulus deal

Most markets in Asia finished weaker on Wednesday, with the exception of equities in mainland China, as investors pored through the details of the Covid-19 stimulus package approved by the European Commission on Tuesday.

In Japan, the Nikkei 225 was down 0.58% at 22,751.61, as the yen weakened 0.2% against the dollar to last trade at JPY 107.01.

Automation specialist Fanuc was up 0.12% and technology conglomerate SoftBank Group added 0.43%, while fashion firm Fast Retailing lost 0.83%.

The broader Topix index slipped 0.62% by the end of trading in Tokyo, to close at 1,572.96.

Fresh data out of Japan showed the country’s manufacturing sector as shrinking for the 13th month in a row, putting even more of a dampener on sentiment.

On the mainland, the Shanghai Composite gained 0.37% to settle at 3,333.16, and the smaller, technology-heavy Shenzhen Composite was 0.84% firmer at 2,251.43.

South Korea’s Kospi was just below the waterline, losing 0.008% to 2,228.66, while the Hang Seng Index in Hong Kong slid 2.25% to 25,097.94.

There was some positive news for traders on the Korean peninsula, as the country’s Ministry of Finance announced a cut to stock transaction taxes to 0.15% from 0.25%, on a gradual basis between now and 2023.

Both of the blue-chip technology stocks were weaker in Seoul, with Samsung Electronics down 1.08% and chipmaker SK Hynix off 1.07%.

The 27 member states of the European Union provided a boost to sentiment, after they reached a landmark deal over fresh Covid-19 stimulus after four straight days of talks in Brussels.

Under the deal, the European Commission will use the financial markets for the first time, to raise €750bn, which will be distributed to the most-impacted countries and sectors through both grants and loans.

“One risk point that seems to have been pushed off the headlines is the next fiscal package from the US government,” said Oanda senior Asia-Pacific market analyst Jeffrey Halley, noting that the current package, directing monetary transfers to business and individuals, effectively ends this week.

“Congressional Republicans and Democrats are far apart at this stage, and a complete breakdown in negotiations would inevitably take the gloss off the recovery rally.

“For now, however, markets seem to be pricing in that sense will prevail.

“That is not a concept we are used to from Washington DC these days, but if the European Union can do it, I guess anyone can.”

Oil prices were lower as the region went to bed, with Brent crude last down 0.84% at $43.95 per barrel, and West Texas Intermediate off 1.07% at $41.47.

In Australia, the S&P/ASX 200 was 1.32% weaker at 6,075.10, after fresh data out of Canberra showed the country’s retail sales rising 2.4% in June, as its economy reopened further.

It followed a 16.9% leap in May, although there were concerns the recovery could be dampened in July as the likes of Victoria implement fresh restrictions as new Covid-19 spikes emerge.

Across the Tasman Sea, New Zealand’s S&P/NZX 50 gave up earlier gains, closing down 0.12% at 11,722.97.

It was led lower by major exporting companies, with specialist dairy exporter A2 Milk down 1.3%, and medical device maker Fisher & Paykel Healthcare off 2%.

Both of the down under dollars were stronger on the greenback, with the Aussie last ahead 0.24% at AUD 1.3996, and the Kiwi also advancing 0.24% to NZD 1.5022.