Asia report: Markets mixed on China, Japan service sector data

The moves came on the heels of Wall Street gains overnight, following US Federal Reserve chair Jerome Powell’s comments indicating progress on inflation.

“Asian equities surged following Federal Reserve chair Jerome Powell’s statement on declining inflation, mirroring the record finish for the S&P 500,” said TickMill market analyst Patrick Munnelly.

“The MSCI AC Asia Pacific Index was on track for its longest winning run since May, with Japanese stocks increasing and nearing their all-time highs.

“SoftBank shares reached their highest closing level in three years, driven by global investments in chips and artificial intelligence.”

Munnelly noted that Japanese government bond yields were uncertain as investors assessed the possibility of the Bank of Japan raising interest rates at its upcoming meeting to announce its bond purchase tapering plan.

“The yen's weakness against the dollar since December 1986 has divided market players on whether the central bank will hike rates in July to curb the currency's decline, potentially marking its second hike this year.

“Despite it not being their primary expectation, the likelihood of the BoJ raising rates this month has increased due to the yen's ongoing struggles.”

Markets close in mixed state across Asia-Pacific region

In Japan, the Nikkei 225 jumped 1.26%, closing at 40,580.76, while the Topix rose by 0.54% to 2,872.18.

Notable gains on the benchmark index included Taiyo Yuden, which climbed 7.14%, Dainippon Screen Manufacturing up by 6.82%, and Mitsubishi Heavy Industries advancing 6.48%.

China’s markets experienced declines, with the Shanghai Composite down by 0.49% to 2,982.38, and the Shenzhen Component dropping by 0.59% to 8,760.43.

Guangdong Champion Asia Electronics fell sharply by 10.01%, Gan & Lee Pharmaceuticals decreased by 8.13%, and Guangzhou Guangri Stock Co dropped 7.84%.

Hong Kong’s Hang Seng Index rose by 1.18%, ending at 17,978.57.

Leading the gains were Li Auto, up 5.69%, Sands China, which increased by 5.09%, and Meituan, climbing 4.55%.

South Korea’s Kospi index increased by 0.47%, closing at 2,794.01.

The market in Seoul was buoyed by HLB Global, soaring 24.34%, Doosan, up 10.02%, and L&F Co, which gained 9.22%.

Australia’s S&P/ASX 200 index edged up by 0.28% to 7,739.90, with significant performers included ZIP Co, rising 8.16%, Paladin Energy, up 6.13%, and Stanmore Resources, which increased by 5.98%.

In New Zealand, the S&P/NZX 50 index saw a modest rise of 0.12%, closing at 11,790.92.

The top gainers were Port of Tauranga, increasing by 8.16%, Sky Network Television, up 2.82%, and Manawa Energy, which rose by 2.66%.

In currency markets, the dollar strengthened 0.32% on the yen, reaching JPY 161.95, while it fell 0.07% against the Aussie to AUD 1.4988, and advanced 0.09% on the Kiwi to change hands at NZD 1.6468.

Oil prices saw slight increases, with Brent crude futures last up 0.13% on ICE at $86.35 per barrel, and the NYMEX quote for West Texas Intermediate edged up 0.04% to $82.84.

China services growth comes in slower than expected

In economic news, China's services sector reported slower-than-expected growth in June, its weakest pace in eight months, as per a private-sector survey.

The Caixin services purchasing managers' index (PMI) dropped to 51.2 from May’s 54.0, below economists’ expectations of 53.4.

Despite that, the index remained above the 50-mark, indicating expansion for the 18th consecutive month.

Business confidence among service providers plummeted to its lowest level since March 2020, driven by global economic concerns and increased competition.

Additionally, after a brief hiring increase in May, service companies reduced employment in June.

In Japan, the service sector experienced a downturn in June 2024.

The final au Jibun Bank services PMI fell to 49.4 from May's 53.8, marking the first contraction since August 2022 and ending a 21-month streak of continuous growth.

Sectors such as consumer services, finance, insurance, real estate, and business services saw reduced demand, while transport, storage, and information and communication sectors experienced gains.

The yen's significant depreciation, down over 12% the year, increased overseas demand for Japanese services.

Despite those challenges, employment and business confidence remained robust.

However, rising wages, food, and fuel costs, exacerbated by the weaker yen, pushed input prices higher, leading to the fastest rate of inflation since last August.

The composite PMI, which includes both manufacturing and service activities, also declined to 49.7 from 52.6, ending a seven-month growth streak.

Reporting by Josh White for Sharecast.com.