Asia report: Stocks mixed as producer prices surge in China

Stocks finished in a mixed state in Asia on Wednesday, as investors pored through the latest inflation data out of China.

In Japan, the Nikkei 225 was down 0.35% at 28,860.80, as the yen strengthened 0.04% against the dollar to last trade at JPY 109.46.

Fashion firm Fast Retailing was down 0.52%, while among the benchmark’s other major components, automation specialist Fanuc rose 1.53% and technology conglomerate SoftBank Group was 0.67% firmer.

The broader Topix index lost 0.28% by the close of trading in Tokyo, settling at 1,957.14.

On the mainland, the Shanghai Composite was ahead 0.32% at 3,591.40, and the smaller, technology-heavy Shenzhen Composite was 0.14% firmer at 2,396.54.

Fresh data out of Beijing showed China’s producer price index rising 9% year-on-year in May, topping expectations for growth of 8.5% from a Reuters poll of economists.

Consumer prices in the People’s Republic, meanwhile, were 1.3% higher than May 2020, coming in lower than the 1.6% pencilled in by the Reuters poll.

Freya Beamish, chief Asia economist at Pantheon Macroeconomics, said the consensus was on the low side, given the leap in the input price indices of the purchasing managers’ indices.

“In the event, the month-on-month increase was even stronger than we thought, at 1.6%, up from 0.9%,” she noted, adding that the increase was driven by energy and metals.

“Our estimate of commodities and processing inflation rose to 18.2% in May, from April’s 15.2%.”

Beamish said manufacturing inflation had little changed, but would soon head upward.

“With the CRB RIND index continuing to rise, and supply-side bottlenecks remaining unresolved, month-on-month gains in the producer price index will probably continue to outpace those last year, with the year-on-year rate of inflation edging higher still and remaining lofty through the second half.

“The authorities have upped the ante on rising commodities prices, but it hasn’t worked yet.

“The People’s Bank of China probably will feel comfortable in moving back toward tightening by the end of the year; strong PPI inflation supports the industrial sector.”

South Korea’s Kospi was off 0.97% at 3,216.18, while the Hang Seng Index in Hong Kong was 0.13% weaker at 28,742.63.

The blue-chip technology stocks were on the back foot in Seoul, with Samsung Electronics down 0.98% and SK Hynix sliding 3.92%.

High on the agenda on Wednesday was the latest growth forecast from the World Bank, which said it now expected the global economy to expand by 5.6% in 2021.

The international lending and funding organisation had previously forecast growth of 4% in January.

It still issued a caveat to its expectations, however, saying global output would still be around 2% below pre-pandemic levels by the end of 2021, even as economies around the world recovered from the coronavirus crisis.

“Not everything is negative because some traders are a bit optimistic due to the World Bank’s new growth projections,” said Avatrade chief market analyst Naeem Aslam.

“It forecast that the global economy will grow by 5.6% in 2021 yesterday which is a positive sign for today's trading session if traders decide to focus on the more optimistic side of things.”

Oil prices were higher by the end of the Asian day, with both Brent crude and West Texas Intermediate last up 0.44%, at $72.54 and $70.36 per barrel, respectively.

In Australia, the S&P/ASX 200 slipped 0.31% to 7,270.20, while across the Tasman Sea, New Zealand’s S&P/NZX 50 managed gains of 0.39% to 12,566.50.

The down under dollars were marginally stronger against the greenback, with the Aussie last ahead 0.09% at AUD 1.2912, and the Kiwi advancing 0.07% to NZD 1.3886.