Asia report: Stocks mixed as Japan avoids technical recession

“Across Asia, most equity indices experienced declines amid speculation that the Bank of Japan might soon raise interest rates,” said TickMill market analyst Patrick Munnelly.

“Economic expansion in Japan picked up speed in the last quarter, raising expectations that the BoJ may raise interest rates for the first time since 2007 as soon as this month.

“The decrease in Japanese stocks was partially attributed to the stronger yen, which typically acts as a barrier for the country's stock market.”

Munnelly noted that stocks in China defied the trend, following reports that Chinese regulators had urged large banks to offer increased support to property development company China Vanke.

“Investors in China will be paying attention to the final remarks from the annual National People's Congress and the setting of the People's Bank of China's medium-term lending facility rate.

“Some analysts anticipate a reduction in the 2.5% one-year rate to bolster China's ambitious 2024 growth goal of approximately 5%.”

Japan leads losses on mixed dat for region

The Nikkei 225 index declined 2.19%, closing at 38,820.49, while the Topix fell 2.2% to settle at 2,666.83.

Leading the losses on Tokyo’s benchmark was Mitsui Mining and Smelting, down 7%, following by SoftBank Group declining 6.04%, and Toyota Tsusho experiencing a decrease of 5.59%.

In China, the Shanghai Composite index managed to gain 0.74%, closing at 3,068.46, while the Shenzhen Component surged by 2.27% to reach 9,581.53.

Top performers in Shanghai included Guangdong Meiyan Jixiang Hydropower and Henan Rebecca Hair Products, both seeing increases of 10.13%.

Hong Kong's Hang Seng Index displayed resilience amidst the volatility, climbing by 1.43% to settle at 16,587.57.

Leading the gains were Xinyi Solar, JD.com, and Li Ning Co, with increases of 11.17%, 6.43%, and 6.4%, respectively.

South Korea's Kospi index slipped 0.77%, closing at 2,659.84, as Korea Investment Holdings fell 5.7% and Mirae Asset Daewoo Securities lost 4.46%.

Australia's S&P/ASX 200 index saw losses of 1.82% to settle at 7,704.20.

Meridian Energy and Bellevue Gold were among the significant losers, declining 8.54% and 6.43%, respectively.

New Zealand's S&P/NZX 50 index saw a modest decrease of 0.42%, closing at 11,873.67, led lower by the A2 Milk Company, down 3.98%, and Skellerup Holdings, which lost 3.37%.

In currency markets, the dollar was last down 0.24% on the dollar, trading at JPY 146.70, while it managed gains of 0.13% against the Aussie to AUD 1.5117.

The greenback was relatively stable against the Kiwi, decreasing 0.02% to change hands at NZD 1.6186.

Oil prices showed marginal gains, with Brent crude futures last up 0.23% on ICE to reach $82.27 per barrel, and the NYMEX quote for West Texas Intermediate increasing 0.22% to $78.18.

Japan avoids technical recession, China consumer prices rebound

In economic news, Japan posted a revised fourth-quarter gross domestic product (GDP) growth figure of 0.4% on an annualised basis, effectively avoiding a technical recession.

The revised figures countered earlier estimates that indicated a 0.4% contraction in the fourth quarter, following a revised 3.3% slump in the third quarter, which met the criteria for a recession.

Investors were closely watching the GDP reading, with the positive revision possibly paving the way for the Bank of Japan to implement rate hikes sooner rather than later.

“Private consumption was revised a little softer and contribution of inventories unexpectedly subtracted a tenth from the quarterly reading, but the GDP deflator rose to 3.9%, which has seen the futures market increase bets on a 10 basis point rate hike from the Bank of Japan to be 95% priced-in for April,” noted analysts at RaboResearch.

Elsewhere, China saw a shift in its inflation dynamics as the consumer price index (CPI) rose by 0.7% year-on-year in February, marking the first increase in four months.

The reversal contrasted with January's 0.8% decline, which was China's most significant deflation rate since September 2009.

It also surpassed economists' expectations, who had forecast a 0.3% rise.

On a month-on-month basis, the CPI jumped 1%, exceeding the 0.7% projected by Reuters polls and surpassing January's 0.3% increase.

In a separate report, China's producer price index (PPI) declined 2.7% year-on-year, surpassing January's 2.5% fall.

“The rebounds in the February’s headline and core CPI were largely due to distortions from the timing of Lunar New Year, domestic demand will like moderate again after the new year period,” said Pantheon Macroeconomics senior China economist Kelvin Lam.

“This is unsurprising since the downturn in the property sector is continuing, and any upcoming stimulus measures on domestic demand will take time to formulate and to work through the economy after implementation.

“More broadly, recovery in domestic demand will only be gradual, as households worry about their income and job prospects amid heightened economic uncertainty while consumer confidence remains low.”

Lam said it was thus too early to say China had emerged from consumer deflation from just one data point.

“The NPC has traditionally set their inflation target at 3.0% disregard of the economy’s status quo, for instance, CPI rose by a measly 0.2% in 2023 amid property market crisis.

“We reckon deflationary pressure to persist in the first half of 2024 before a mild reflationary scenario settles in.”

Reporting by Josh White for Sharecast.com.