Asia report: Weak Japan data drags markets down

The Nikkei 225 tumbled 3.55% to 16,164.16, as Tokyo took in a bitterly disappointing Tankan survey.

It showed sentiment at large manufacturers in the country reach its lowest point in almost three years, with reports that it was heading even lower in the second quarter.

The gauge fell to 6 in March from 12 in December. Economists polled by the Wall Street Journal had predicted a reading of 8. The figure represents the percentage of respondents who believe conditions are favourable, less those who believe they are unfavourable.

Stephen Innes, senior trader at OANDA Asia Pacific, said the report came in below even the most pessimistic predictions.

"Predictably, the Nikkei has reacted poorly to the print and is dragging the dollar-yen lower in its wake. It signals a disturbingly large drop in business confidence."

The safe haven yen rallied on the news, and was last 0.21% stronger against the greenback at JPY 112.33 per USD.

That was bad news for Japan’s exporters, with Toyota falling 3.04%, Nissan slipping 4.25% and Honda losing 4.67% by close.

Markets in China were mixed, with the Shanghai Composite Index eking out a 0.17% gain to 3,008.98, while the Shenzhen Composite lost 0.56% to close at 1,901.52.

Those losses came despite better-than-expected manufacturing data, as the country’s official Purchasing Manager’s Index came in at 50.2 for March, against a Reuters-polled prediction of 49.3. It returned to growth for the first time since July.

The unofficial Caixin survey also came in higher, with a reading of 49.7 against 48 in February. It was the first month-on-month rise in a year. A reading above 50 indicates expansion, while one below 50 shows contraction.

Beijing’s official survey is widely understood to focus on larger companies, while the Caixin looks at smaller

In Hong Kong, the Hang Seng Index finished down 1.34% at 20.498.92, while the Kospi in South Korea was 1.12% lower at 1,973.57.

IG market analyst Angus Nicholson said the markets looked to be lacking any major stimulus to drive any higher, with the sell-off in European and US markets overnight, along with the Tankan survey pushing Asia lower.

“The main concern in the markets appears to be with the US. The nonfarm payrolls tonight are important, although few expect the headline jobs numbers to disappoint. The bigger US-related concern for equities is what is shaping up to be another negative earnings season, a scenario that is likely to weigh on markets globally,” he noted.

Oil prices were also under pressure after Asian hours, with Brent crude last down 0.03% at $40.32 per barrel and West Texas Intermediate down 0.08% at $38.31.

In Australia, the S&P/ASX 200 dipped below 5,000 and closed down 1.64%, at 4,999.40. It was dragged by losses in materials and energy, which were down 0.25% and 2.11% respectively. Financials - which have been a concern in Sydney this week - was down 2.35%.

AMP Capital head of investment strategy Shane Oliver said bad debt worries were still weighing on the country’s big banks and the wider share market.

"While the extra $100 million in bad debt charged announced by [ANZ] due to the resources slump is small, investors naturally worry that the bad debt cycle has now bottomed, and like cockroaches, if there is one downgrade, there are likely to be more," he said.

New Zealand was also dragged down by the Australasian banks, with the S&P/NZX 50 falling 0.7% to 6,708.02. Losses at Australia and New Zealand Banking Group and Westpac weighed on the index.

In currencies, the People’s Bank of China fixed renminbi stronger on Friday morning at CNY 6.4585 against the USD, compared with CNY 6.4612 on Thursday.

The Aussie also gained on the greenback, and was last 0.28% stronger at AUD 1.3023, while the Kiwi was broadly flat, last trading at NZD 1.4474 per USD.