Asia report: Stocks mixed as prices fall in China

Equity markets across the Asia-Pacific region finished with a mixed performance on Monday, as Chinese stocks rebounded amid persistent deflationary pressures resulting from weak domestic demand.

Meanwhile, Japan’s stocks jumped amid increasing speculation that the central bank might not raise interest rates in the upcoming week.

“Stocks in the Asia-Pacific region traded mixed as investors processed recent data releases, including strong US jobs data and worsening deflation in China,” said TickMill market analyst Patrick Munnelly.

“This week's upcoming risk events, such as US CPI data and central bank updates, added to the cautious mood.

“The Nikkei 225 was the biggest gainer, following a pushback on recent Bank of Japan (BoJ) speculation,”

Munnelly said the BoJ did not see a need to end negative interest rates in December, but planned to make a decision based on data up until the last minute.

“This is because there is no proof of sustainable inflation and they have not seen enough evidence of wage growth to support sustainable inflation.

“The officials believe that the potential cost of waiting for more data is not very high.

“The Hang Seng and Shanghai Composite were pressured by weakness in tech and property, and China's consumer inflation and factory gate prices declined more than expected, suggesting weak demand in the world's second-largest economy.”

Stocks finish mixed with most bourses higher

In Japan, the Nikkei 225 index saw a notable increase of 1.5%, closing at 32,791.80, while the Topix index also rose by 1.47% to reach 2,358.55.

Leading the gainers on Tokyo’s benchmark were Tokyo Electric Power, surging by 14.63%, Mitsui Engineering & Shipbuilding, up 9.19%, and Chubu Electric Power, with a 5.55% gain.

China's stock market exhibited a turnaround, with the Shanghai Composite index climbing by 0.74% to 2,991.44, and the Shenzhen Component index increasing by 0.82% to 9,632.61.

Among the leading performers in Shanghai were Anhui Xinhua Media, rising by 10.04%, and Flying Technology, which saw a 10.02% gain.

Hong Kong's Hang Seng Index, however, experienced a decline of 0.81%, led lower by Li Ning Co, which dropped by 14.29%, JD.com by 6.25%, and Meituan by 3.64%.

In South Korea, the Kospi index posted a modest gain of 0.3%, closing at 2,525.36, with notable gainers including Celltrion, up 5.96%, and LG Innotek, which saw a 4.02% increase.

Australia's S&P/ASX 200 index edged up by 0.06%, reaching 7,199.00, led higher by Beach Energy, with a 3.69% gain, and Contact Energy, which increased by 3.46%.

In New Zealand, the S&P/NZX 50 index experienced a slight decline of 0.4%, closing at 11,449.47.

The biggest decliners in Wellington included Vista Group International, down 2.8%, and Oceania Healthcare, which declined by 2.7%.

Turning to currency markets, the dollar was last 0.83% stronger on the yen, trading at JPY 146.16, while it increased 0.33% against the Aussie to AUD 1.5250.

The greenback was 0.18% stronger on the Kiwi, changing hands at NZD 1.6359.

In oil markets , Brent crude futures were last down 0.4% on ICE at $75.54 per barrel, while the NYMEX quote for West Texas Intermediate dropped 0.53% to $70.85.

Consumer, producer prices fall in China

In economic news, China saw a significant decline in consumer prices for the month of November, marking the sharpest drop in three years, while producer prices remained in negative territory.

China's consumer price index (CPI) for November registered a year-on-year decrease of 0.5%, reaching its lowest point since November 2020.

The decline was notably more than the 0.2% fall recorded in October, while a Reuters poll of economists had anticipated a more modest 0.1% decline in China's CPI.

On the other hand, China's producer price index (PPI) for November experienced a year-on-year decrease of 3.0%, surpassing the 2.6% decline observed in October.

It marked the 13th consecutive month in which producer prices have remained in deflationary territory.

A Reuters poll had previously estimated a slightly less severe drop of 2.8% for the month of November.

“Consumer demand is likely to revive only gradually, given soft sentiment and a shaky labour market,” said Pantheon Macroeconomics chief China economist Duncan Wrigley.

“The December Politburo meeting statement struck a more confident tone about China’s recovery prospects than the mid-year readout.”

Wrigley said that meant China would probably continue to channel fiscal stimulus through infrastructure and manufacturing investment, trusting that to spillover into domestic demand, and hence jobs and ultimately consumption.

“The statement offered no hint that policymakers are considering a big consumer-led or credit-based stimulus.

“The Central Economic Work Conference, likely to take place in the next week or so, should confirm this policy approach.”

Reporting by Josh White for Sharecast.com.