Asia report: Markets fall after tsunami of regional data

South Korea reported an inflation rate of 3.3% for November, falling short of the 3.7% expected by a Reuters poll, while Japan's capital Tokyo recorded an inflation rate of 2.6%, signalling a drop from the 3.3% observed in October.

China's Caixin service purchasing managers' index meanwhile reached a three-month high, while Australia’s central bank stood pat on interest rates.

“Asia stocks saw declines as they followed a mostly negative trend from Wall Street,” said TickMill market analyst Patrick Munnelly.

“Major indices on Wall Street were choppy and weighed down due to a rebound in yields ahead of important data releases.

“In Japan, the Nikkei 225 continued to weaken and fell below the 33K handle, despite Tokyo inflation data being softer than expected.”

Munnelly added that the Hang Seng and Shanghai Composite also retreated, with the latter testing the downside at the 3,000 level due to ongoing geopolitical tensions.

“China criticised the US for considering it a threat, and this was followed by US Commerce Secretary [Gina] Raimondo's call for more funds to support chip curbs.

“The Caixin Services PMI data, which showed a three-month high, only provided a brief boost.”

Equities in the red across the Asia-Pacific region

In Japan, the Nikkei 225 index dropped by 1.37%, closing at 32,775.82, while the Topix index decreased by 0.84% to 2,342.69.

Leading decliners on Tokyo’s benchmark included Advantest, down 6.21%, Dainippon Screen Manufacturing, down 5.32%, and Tokyo Electron, down 3.96%.

China's markets also experienced losses, with the Shanghai Composite and Shenzhen Component indices falling by 1.67% to 2,972.30 and 1.97% to 9,470.36, respectively.

Notable decliners in Shanghai included EmbedWay Technologies, down 10%, and Harbin VITI Electronics, down 8.26%.

Hong Kong's Hang Seng Index reported a substantial decline of 1.91%, closing at 16,327.86.

Key companies such as Lenovo Group, down 10.22%, WuXi Biologics, down 8.45%, and Haidilao International, down 5.86%, were in the red.

In South Korea, the Kospi index saw a 0.82% decrease, closing at 2,494.28, with top losers including Posco Future M, down 7.18%, and NCsoft, down 4.63%.

Meanwhile, in Australia, the S&P/ASX 200 index decreased by 0.89% to 7,061.60, led lower by Contact Energy, down 10.99%, and Liontown Resources, down 9.19%.

New Zealand's S&P/NZX 50 index reported a marginal decline of 0.1%, closing at 11,356.99, with the downside led by Serko, down 4.96%, and Synlait Milk, down 4.84%.

In currency markets, the dollar was last 0.15% weaker on the yen, trading at JPY 146.99.

Conversely, the greenback was stronger on the down under dollars, rising 0.91% on the Aussie to AUD 1.5243, and advancing 0.38% against the Kiwi to change hands at NZD 1.6281.

On the oil front, Brent crude futures were last down 0.15% on ICE at $77.91 per barrel, while the NYMEX quote for West Texas Intermediate experienced a marginal decline of 0.14% to $72.94.

Australia holds rates, Tokyo inflation slows, China services expand

On a busy day for economic news in the region, Australia's central bank maintained its benchmark policy rate at 4.35% during its December meeting, aligning with economists' expectations.

The Reserve Bank of Australia, in its statement, noted that the limited information available on the domestic economy since the November meeting was in line with expectations.

In Tokyo, the headline inflation rate for November recorded a rise of 2.6%, marking its slowest increase since July 2022.

That followed October's spike to 3.3%, which had deviated from a downward trend observed since January.

Tokyo's inflation figures are widely considered leading indicators of national trends in Japan.

Core inflation, excluding fresh food prices, stood at 2.3%, slightly lower than Reuters' expectations of 2.4% and down from 2.7% in October.

The ‘core-core’ inflation rate, which further excludes fuel prices, dipped to 3.6% from 3.8% in October, as monitored by the Bank of Japan.

“Consumer inflation is now cooling again, after the brief oil price-induced surge in October, while the PMIs point to softening economic activity,” said Duncan Wrigley at Pantheon Macroeconomics.

“The BoJ is unlikely to make a policy change at its December meeting and is increasingly likely to drag its feet on removing negative short-term rates.

“The lagged effect of earlier import cost surges is gradually working its way through the system, while wage growth has yet to gain much ground.”

Wrigley said the spring wage round would be a key event to watch.

Business activity in Japan meanwhile contracted for the first time this year, according to fresh data from au Jibun Bank.

November's composite purchasing managers' index (PMI) reading came in at 49.6, down from the earlier flash figure of 50.0 reported last month.

A reading below 50 indicates contraction, while above 50 signals expansion.

Additionally, Japan's service sector activity softened to 50.8 in November, indicating the weakest growth since November last year.

“Japan is unlikely to recover ahead of the global economy, despite the new fiscal stimulus package,” Duncan Wrigley added.

“Real wages are still falling, and cost pressures remain intense, especially for manufacturing, though are easing.

“Both the manufacturing and services PMI indicate a softening Japanese economy going into 2024, raising doubts about businesses’ - especially SMEs’ - financial capacity to meet wage hike demands.”

Elsewhere, South Korea's inflation rate for November slowed to 3.3%, marking its first decline in three months of acceleration.

The figure was below expectations, with a Reuters poll forecasting a moderation to 3.7% from October's 3.8%.

On a month-on-month basis, the consumer price index exhibited a steeper decline of 0.6%, surpassing Reuters' poll expectations of 0.15%.

In China, the Caixin/S&P services PMI for November reached its highest level in three months, diverging from Beijing’s official PMI reading, which indicated a contraction.

The private survey reading stood at 51.5 in November, up from 50.4 in October and 50.2 in September.

In contrast, China's official non-manufacturing PMI services sub-index for November showed a contraction for the first time since December 2022.

“Services activity is likely to continue to tread sideways over the next few months, in the absence of any catalysts,” Pantheon’s Duncan Wrigley said.

“Households have proved eager to eat out, go on short trips and consumer leisure services, evident in the buoyant summer domestic tourism season.

“China is promoting foreign tourism, including by offering visa-free entry for people from select countries, but visitor levels have crashed since before the pandemic and are unlikely to pick up rapidly given the soft global economy.”

Hong Kong's private sector activity meanwhile expanded for the first time since June, according to S&P Global.

The city's PMI rose to 50.1, just above the 50 mark, with improvements noted in new business and activity gauges.

Reporting by Josh White for Sharecast.com.