Asia report: Stocks fall on quiet day, China's manufacturing returns to expansion

Asian stock indices saw a downward trend on Monday, even as manufacturing data from China showed a positive shift back into expansion.

Several key regional markets remained closed due to various national holidays, making for a relatively quiet trading day.

“Asian equity markets saw mixed trading as the region was significantly affected by holiday closures,” said TickMill market analyst Patrick Munnelly.

“The Nikkei 225 initially showed gains, but it later pulled back, slipping below the 32,000 level.

“The Hang Seng and Shanghai Composite were closed for the National Day Golden Week celebrations, and other countries like South Korea and India also had holiday closures.

Munnelly noted that the recent government shutdown threat in the US was averted over the weekend, allowing for the nonfarm payrolls report for September to be released at the end of the week.

“This report will be a crucial factor for Federal Reserve policymakers in their decision-making regarding interest rates.”

Stocks in the red on the region’s few open bourses

In Japan, the Nikkei 225 slipped by 0.31% to close at 31,759.88, while the broader Topix index retreated by 0.39% to finish at 2,314.44.

Leading the downturn on Tokyo’s benchmark was Rakuten, which saw its stocks plummet by 5.48%.

Other notable declines came from Pacific Metals, down by 3.57%, and Sumitomo Dainippon Pharma, which dipped 3.51%.

China and Hong Kong markets remained closed today during the National Day holiday.

Similarly, South Korea kept its markets shuttered after officials in Seoul extended the Chuseok holiday this year to bolster domestic consumption.

In Australia, the S&P/ASX 200 edged lower by 0.22%, settling at 7,033.20.

Among the more significant drags on the index, Coronado Global Resources fell by 4.37%, Domino's Pizza Enterprises shed 4.08%, and Graincorp saw a decline of 3.97%.

Over in New Zealand, the S&P/NZX 50 was down by 0.47%, closing at 11,243.29.

The biggest hit came from Pacific Edge, whose stocks tumbled a staggering 10.74%.

Other noticeable drops included Serko, down by 4.42%, and KMD Brands, which decreased by 3.45%.

On the currency front, the dollar was last 0.18% stronger on the yen, trading at JPY 149.64.

The greenback also strengthened against its Australasian counterparts, rising 0.57% to AUD 1.5629 and 0.41% to NZD 1.6742, respectively.

In the oil sector, Brent crude futures were last up 0.97% on ICE to stand at $93.09 per barrel, while the NYMEX quote for West Texas Intermediate followed closely, gaining 0.93% to reach $91.63.

Positive shifts in Chinese factory activity and Japan's monetary measures

In economic news, data from China's National Bureau of Statistics over the weekend revealed a promising turn for China's manufacturing sector, as factory activity in September marked its first expansion since April.

The official purchasing managers' index (PMI) climbed to 50.2, up from August's 49.7, outpacing Reuters' anticipated 50.0.

A score above 50 indicates growth, while anything below suggests a contraction.

China's non-manufacturing PMI meanwhile edged up to 51.7 from its previous 51.

A private-sector survey conducted by Caixin/S&P Global underscored that expansion, although at a slightly reduced pace, registering 50.6, down from 51.0 in August.

“Manufacturing conditions across China improved slightly for the second consecutive month in September,” Caixin said in its press release.

However, it also hinted at restrained future expectations and an employment decline in Chinese manufacturing units.

“Policymakers are likely to view the improved manufacturing PMIs as evidence for stabilising domestic demand on the back of the limited stimulus measures rolled out since August,” said Pantheon Macroeconomics chief China economist Duncan Wrigley.

“This won’t change their worries about China’s “tortuous” and drawn-out recovery path ahead, but it will reinforce their determination not to repeat a debt-fuelled and indiscriminate mega stimulus.”

In Japan, sentiment among the country's significant manufacturers experienced a positive shift.

The third-quarter Tankan survey from the central bank showed a rise to 9, a jump from 5 in the preceding quarter and surpassing Reuters' forecast of 6.

Furthermore, the survey highlighted that major companies expected to increase their capital expenditure by 13.6% for the fiscal year ending in March 2024.

In a strategic response to recent fluctuations in government bond yields, the Bank of Japan (BoJ) announced its intention to augment bond purchases during Wednesday's auction.

The move was intended to ensure the continued stability of its yield curve control policy.

Specifically, the central bank has earmarked bonds with a tenure ranging from five to 10 years for these additional acquisitions.

Notably, the 10-year Japanese government bonds' yields surged to a significant 0.775% on Monday, a peak not seen since September 2013.

Finally, The BoJ's September assembly saw policymakers deliberating the preconditions for concluding the bank's ultra-accommodative policy.

The central bank stressed the necessity for sustained patience, asserting, “Sustainable and stable achievement of the price stability target, accompanied by wage increases, has not yet come in sight.”

Reporting by Josh White for Sharecast.com.