Asia report: Stocks mixed ahead of US inflation, RBNZ holds rates

Asia-Pacific stocks presented a mixed picture at Wednesday's close, as investors shifted their focus across the Pacific to a critical inflation reading expected from the United States later in the global day.

Central bank decisions were also in focus, as policymakers in New Zealand hit the pause button on rate hikes for the first time in 20 months.

“Asian equity markets exhibited a mixed performance as investors maintained caution ahead of the release of key US inflation data,” said TickMill market analyst Patrick Munnelly.

“The Nikkei 225 in Japan declined – this underperformance was influenced by a stronger yen, as the USD-JPY pair retreated below JPY 140.

“Additionally, disappointing machinery orders data also contributed to the negative sentiment.”

Munnelly said the Hang Seng benefitted from strength in the technology sector, but the Shanghai Composite experienced a slight decline.

“Despite stronger-than-expected loans and aggregate financing data from China, the mainland market remained cautious due to upcoming key events and uncertainties.

“Investors in the region were particularly cautious ahead of the release of US inflation data, which is considered a key risk event.”

Stocks mixed across region ahead of key US CPI print

In Japan, both the Nikkei 225 and Topix ended in the red, down by 0.81% at 31,943.93 and 0.67% at 2,221.48 respectively.

A number of technology companies significantly pulled down Tokyo’s benchmark, with Eisai dropping 4.14%, Dainippon Screen Manufacturing falling 3.74% and Tokyo Electron declining 3.33%.

In mainland China, both the Shanghai Composite and the Shenzhen Component concluded in negative territory.

The Shanghai Composite dropped 0.78% to finish at 3,196.13, and the Shenzhen Component fell 0.99% to close at 10,919.26.

CSSC Steel Structure Engineering slid 7.9%, while Guangshen Railway declined 7.32%.

In contrast, Hong Kong's Hang Seng Index had a positive day, rising 1.08% to end at 18,860.95.

Tech giant Meituan drove gains, climbing 4.34%, while Lenovo Group and Sunny Optical Tech also added to the uptrend, increasing 2.97% and 2.86% respectively.

South Korea's Kospi edged up 0.48% to close at 2,574.72, largely driven by gains from Samsung Heavy Industries and Samsung Engineering, which rallied 8.36% and 6.3% respectively.

The Australian S&P/ASX 200 index recorded a modest gain, increasing 0.38% to close at 7,135.70.

Fertiliser and explosive company Incitec Pivot climbed 5.42%, while Capricorn Metals gained 4.1%.

In New Zealand, the S&P/NZX 50 index remained relatively flat, slipping slightly by 0.01% to close at 11,908.27.

KMD Brands declined significantly by 8.65%, and Heartland Group fell by 2.75%.

In currency markets, the yen strengthened 0.54% on the dollar to last trade at JPY 139.60, while the Aussie advanced 0.01% to AUD 1.4954.

The Kiwi, meanwhile, was 0.01% weaker against the greenback, changing hands at NZD 1.6133.

Oil prices saw a minor rise, with Brent crude futures last up 0.29% on ICE at $79.63 per barrel, and the NYMEX quote for West Texas Intermediate also 0.29% firmer to $75.05.

Central banks, unemployment, and inflation in focus across region

On the economic front, the Reserve Bank of New Zealand (RBNZ) maintained its benchmark interest rate at 5.5%, making its first halt in rate adjustments since October 2021.

The central bank indicated that the current interest rate level was effectively curbing spending and inflation, as expected.

However, it also said interest rates needed to persist at a restrictive level for an indefinite period to ensure that consumer inflation aligned with its target range of between 1% and 3%.

Across the Tasman Sea, the Reserve Bank of Australia's governor Philip Lowe said in a speech that while the bank maintained the interest rate at 4.1% during the last meeting, more tightening could be necessary to control inflation within a reasonable period.

Lowe said the RBA’s next actions would rely on how the economic and inflation scenario unfolded.

He added that the central bank would have new economic forecasts and an updated risk balance assessment at its next meeting on 1 August.

Elsewhere, South Korea's unemployment rate for June, adjusted for seasonal variations, saw a minor rise to 2.6%, following a joint-record low of 2.5% in May.

Year-on-year comparisons showed a 0.4 percentage point decrease in unemployment, totalling 763,000 individuals in June.

South Korea's employment-to-population ratio in June, according to the national statistics department, increased by 0.6 percentage points year-on-year to 63.5%.

In Japan, the corporate goods price index - an indicator of wholesale inflation - increased at a lesser rate of 4.1% year-on-year in June.

It marked the sixth consecutive month of decelerating growth, as June's rise of 4.1% was a drop from May's adjusted figure of 5.2%, presenting the slowest inflation rate since April 2021.

Reporting by Josh White for Sharecast.com.