Asia report: Shares down as investors mull ECB rate cut talk

Asia-Pacific markets closed mostly lower Tuesday as traders mulled comments from European Central Bank officials suggesting interest rates could be cut next month.

Australia's S&P/ASX 200 closed 0.28% lower at 7,766.70, as Australia’s retail sales growth missed estimates. Sales in April rose 0.1% compared with March and expectations of a 0.2% increase.

In Japan, the Nikkei 225 dipped 0.11% to end at 38,855.37, while the broad-based Topix closed marginally higher at 2,768.50.

The Bank of Japan's key measurements of underlying inflation in April all fell below its 2% target for the first time since August 2022, according to data published Tuesday.

The weighted median inflation rate, among the three indicators closely watched as a gauge on whether price rises are broadening, rose 1.1% in April from a year earlier after a 1.3% gain in March, the data showed.

South Korea’s Kospi ended flat at 2,722.85. Hong Kong’s Hang Seng index edged 0.1% lower, while mainland China’s Shanghai Composite was down 0.46% to 3,109.

ECB Governing Council member Olli Rehn said inflation was "converging to our 2% target in a sustained way, and the time is thus ripe in June to ease the monetary policy stance and start cutting rates".

The bank's chief economist Philip Lane told the Financial Times: “Barring major surprises, at this point in time there is enough in what we see to remove the top level of restriction.”

Chinese equities rose earlier in the session after senior leaders of the ruling Communist Party met and affirmed Beijing’s determination to contain financial risks.

In a readout of the meeting reported by state news agency Xinhua, the leaders “noted that preventing and defusing financial risks is a major challenge that must be overcome in order to achieve high-quality development, as it concerns national security, overall development and the safety of the people’s property".

Efforts to strengthen oversight “should be implemented strictly to send a strong signal that any violator will be held accountable, so that financial oversight will actually have ‘teeth and thorns’ and be sharp-pointed,” Xinhua added.

Reporting by Frank Prenesti for Sharecast.com