Asia report: Stocks firmer after strong US payrolls report

Stocks were mixed in Asia on Monday, as investors reacted to a much-better-than-expected jobs report out of the United States on Friday.

In Japan, the Nikkei 225 was up 0.26% at 28,249.24, as the yen weakened 0.02% against the dollar to last trade at JPY 135.04.

Automation specialist Fanuc was up 0.15%, fashion firm Fast Retailing was ahead 0.31%, and technology conglomerate SoftBank Group was 0.74% higher.

SoftBank’s rise came before its earnings release after the close, in which it swung to a quarterly loss of JPY 3.16trn, from a JPY 761.5bn profit a year ago.

Its venture capital ‘Vision Fund’ lost a total of JPY 2.93trn in the quarter through June.

The broader Topix index was 0.22% firmer by the end of trading in Tokyo, settling at 1,951.41.

On the mainland, the Shanghai Composite managed gains of 0.31% to 3,236.93, and the technology-heavy Shenzhen Component was 0.27% higher at 12,302.15.

Fresh official data out of Beijing over the weekend showed dollar-denominated exports surging 18% year-on-year in July, beating Reuters-polled expectations for a 15% improvement.

Imports, meanwhile, were up 2.3% in dollar-denominated terms, which was less than the 3.7% pencilled in by analysts polled by Reuters.

“Year-over-year growth in July was driven by the EU, Japan, and ASEAN, with exports to the US slowing sharply, to 11% from 19.3% - a pattern matched by the month-on-month seasonally-adjusted data,” noted Craig Botham at Pantheon Macroeconomics.

“The product data suggests an outsized contribution from refined oil in July, without which the year-over-year growth rate would have fallen.

“It is notable too that both Europe and Japan are net energy importers, with China currently - allegedly - buying Russian oil at a discount.”

Botham said the scope for an “easy arbitrage trade” for Chinese refiners seemed obvious.

“Demand for mechanical and electrical products also rose, but slowed on a month-on-month seasonally-adjusted basis, again pointing to fading momentum.

“A slowdown in high tech products, and a range of intermediate goods, leaves the July growth performance looking quite narrow.

“The modest improvement in import growth seems to be driven by food and energy products, and by machine tools.”

Volumes data showed an acceleration in iron ore imports, Craig Botham pointed out, but a “sharp slowdown” in copper demand, and thus “not very supportive overall” for the construction and infrastructure spending outlook.

He said the main region to benefit from increased import demand were ASEAN nations, suggesting the improvement in July was more about intermediate goods demand than final demand, with domestic growth still struggling.

“Overall, we think the data suggest export growth should wane in the second half, with sources of demand fading, but policy efforts to shore up manufacturing have the effect of subsidising exports, so the process is taking longer than we initially expected.

“Imports, meanwhile, are unlikely to impress, but should eke out continued single digit growth.

“The combination should exert gradual downward pressure on the trade balance in the second half.”

South Korea’s Kospi eked 0.09% higher to 2,493.10, while the Hang Seng Index in Hong Kong was down 0.77% at 20,045.77.

The special administrative region’s primary airline Cathay Pacific ascended 1.42% after the city’s authorities announced plans to reduce hotel quarantine for travellers to three days from a previous seven, with four days of “health surveillance” afterwards.

Seoul’s blue-chip technology stocks were on the back foot, with Samsung Electronics down 1.14% and SK Hynix losing 2.23%.

The losses for SK Hynix came on the back of local media reports that the city of Yeoju was demanding more compensation from the chipmaker for water infrastructure used to pipe massive quantities of water to a chip plant in another locale.

Sentiment was given an early boost in the region on Monday, after the key nonfarm payrolls reports in the US came in well above expectations after Asia went to bed on Friday, at 528,000.

Oil prices were lower at the end of the Asian day, with Brent crude futures last down 0.88% on ICE at $94.08 per barrel, and West Texas Intermediate off 0.94% on NYMEX at $88.17.

In Australia, the S&P/ASX 200 added 0.07% to 7,020.60, with OZ Minerals rocketing 35.25% after the company rejected an AUD 8.34bn takeover offer from Anglo-Australian mining giant BHP.

BHP itself advanced 0.8% by the end of the day in Sydney.

Across the Tasman Sea, New Zealand’s S&P/NZX 50 was off 0.22% to 11,702.81, as investors kept a firm hold on their pocketbooks ahead of earnings season in Wellington.

The down under dollars were both stronger on the greenback, with the Aussie last ahead 0.77% at AUD 1.4358, and the Kiwi advancing 0.64% to NZD 1.5947.

Reporting by Josh White at Sharecast.com.