Asia report: Stocks drop as Japan growth, China inflation fall short

Asia-Pacific markets faced broad declines on Monday, with Hong Kong’s Hang Seng Index leading the losses following weaker-than-expected economic data from both China and the US.

A lacklustre US jobs report from Friday and softer-than-expected data from China and Japan weighed heavily on investor sentiment across the region.

“Amidst economic uncertainties, investors began September in a ‘risk-off’ stance as the S&P 500 snapped a three-week winning streak and dropped 4.2%,” said TickMill’s Patrick Munnelly.

“There is fear in almost every industry: technology is the most nervous, defensive players are a little happier, and tech is down 7.1%.

“Following Friday's generally negative signals from global markets, Asian stock markets are basically down on Monday as traders respond to China's softening inflation statistics.”

Munnelly noted that the Nikkei benchmark in Japan slid, with technology stocks being among the most significant decliners.

“The Nikkei experienced its first dip below the psychologically-significant 36,000 threshold since 13 August.

“However, it later recovered to reclaim the 36,000 handle and trade in positive territory as bargain hunters stepped in.”

Markets in the red across the region

In Japan, the Nikkei 225 fell 0.48% to 36,215.75, and the Topix dropped 0.68% to 2,579.73.

The market was dragged down by declines in major stocks such as Lasertec, which dropped 4.8%, Isuzu Motors, down 3.78%, and Kawasaki Kisen Kaisha, which lost 3.38%.

China’s major indexes also posted losses - the Shanghai Composite dropped 1.06% to 2,736.49, and the Shenzhen Component slipped 0.83% to 8,063.27.

Key companies like Shanghai Jin Jiang International Industrial Investment, Shanghai DaZhong Public Utilities Group, and Dazhong Transportation Group each saw sharp declines of about 10% in Shanghai.

Hong Kong’s Hang Seng Index led regional losses, falling 1.42% to 17,196.96.

Significant declines were seen in stocks like PetroChina, down 6.17%, Hansoh Pharmaceutical Group, which dropped 6.04%, and Orient Overseas International, which lost 5.76%.

South Korea’s Kospi fell 0.33% to 2,535.93, with major companies such as POSCO Future M, Samsung Card, and Yuhan each posting declines exceeding 4.5%.

In Australia, the S&P/ASX 200 dropped 0.32% to 7,988.10, with Super Retail Group and Nib Holdings seeing substantial losses of 7.35% and 6.32%, respectively.

New Zealand’s S&P/NZX 50 was the outlier, edging up 0.05% to 12,621.62, with Oceania Healthcare and Skellerup Holdings leading the modest gains at 2.5% and 2.08%.

In currency markets, the dollar was last up 0.86% on the yen to trade at JPY 143.53, while it advanced 0.2% against the Aussie to AUD 1.5021, and climbed 0.62% on the Kiwi to change hands at NZD 143.53.

Oil prices strengthened, with Brent crude futures last up 1.17% on ICE at $71.89 per barrel, and the NYMEX quote for West Texas Intermediate rising 1.26% to $68.52.

Japan GDP growth, China inflation fall short of expectations

In economic news, Japan's economy grew at an annualised rate of 2.9% in the second quarter, falling short of the 3.2% forecast by economists surveyed by Reuters and below the preliminary estimate of 3.1%.

The slower-than-expected growth rate could limit the Bank of Japan's ability to raise interest rates, as policymakers faced ongoing challenges in sustaining economic momentum.

In China, consumer inflation showed a modest increase in August, with the consumer price index (CPI) rising by 0.6% year-on-year, up slightly from July's 0.5% gain.

The inflation uptick was largely driven by a 2.8% increase in food prices, which were affected by extreme weather, including floods and heatwaves that disrupted agricultural output.

Despite the rise in food costs, broader inflationary pressures remained weak.

Core inflation, which excludes food and fuel prices, fell to 0.3%, its lowest level in more than three years, signalling continued sluggish domestic demand.

Additionally, the producer price index (PPI) declined 1.8% year-on-year in August, deepening from a 0.8% drop in July and reflecting ongoing overcapacity in production as supply continues to outpace demand.

In the US on Friday, nonfarm payrolls increased by 142,000 in the latest report, falling short of the 161,000 jobs economists had predicted.

However, the unemployment rate edged down to 4.2%, meeting expectations, offering some reassurance amid signs of a slowing labour market.

Reporting by Josh White for Sharecast.com.