Asian stocks saw a mixed day of trading on Tuesday with Covid in China, a gloomy economic outlook and critical central bank meetings all having an impact on investor sentiment.
Japanese stocks extended their gains, though performances were modest with investors reluctant to make big moves ahead of this week’s Bank of Japan policy meeting, despite lowered estimates for aggressive tightening by the US Federal Reserve.
The Nikkei share average started trading 0.8% higher to break through the psychological barrier of 27,000 before finishing at 26,961.68 as markets closed up 0.65% for the day. The broader Topix gained 0.54%.
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Shares of Japanese heavy industries were some of the strong performers, buoyed by a report over the weekend that Prime Minister Fumio Kishida’s government won’t set a ceiling on defence spending in the next annual budget.
Kawasaki Heavy Industries Ltd rose 5.22% and Mitsubishi Heavy Industries Ltd was up 2.5%.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.4%.
China investors were also concerned about a further hit to the country’s property sector as growing numbers of homebuyers have threatened to stop mortgage payments on unfinished apartments.
Rising Covid-19 cases in China also raised fears of a further slowdown in economic growth.
“We think the mortgage boycott and potential default risks are worrisome,” analysts at Barclays said in a note.
The Shanghai Composite Index was largely flat gaining 0.04%, or 1.33 points, to 3,279.43, while the Shenzhen Composite Index on China’s second exchange was up 0.13%, or 2.96 points, to 2,194.92.
The Hang Seng Index dropped 0.89%, or 185.12 points, to 20,661.06.
China Covid Cases Weigh
Elsewhere across the region, the rising number of Covid cases in China and fears of a global recession were also weighing on investor sentiment.
Stocks fell following cues from a weak Wall Street session on Monday and equities in Thailand dropped 1.3% to lead losses, followed by South Korea which slipped 0.3%.
Indian stocks edged ahead with Mumbai’s signature Nifty 50 index up 0.32%, or 52.05 points, at 16,330.55.
Globally, European shares slipped, while the dollar hovered below last week’s peak, with investors eyeing central bank meetings this week for clues on market direction.
The broader Euro STOXX 600 fell 0.6%, with indexes in Paris and Frankfurt both down 0.9%.
Traders were on edge with few immediate pieces of macroeconomic or political news to drive direction, market players said. The MSCI world equity index, which tracks shares in 50 countries, fell 0.1%.
Dollar Retreats From Two-Decade Peak
Wall Street futures gauges pointed to slim gains. US equity markets had closed lower overnight, impacted by reports Apple plans to slow hiring and spending growth next year.
The dollar continued its slow retreat from last week’s two-decade peak, hovering just above a one-week low touched on Monday.
The dollar index – which gauges the greenback against six counterparts – was down 0.3% at 107.100, well back from the high of 109.29 last week, a level not seen since September 2002.
Market players pointed to central bank meetings later in the week as likely drivers of market moves.
The European Central Bank and Bank of Japan both meet on Thursday, with the ECB widely expected to begin raising rates from their pandemic era lows with a 25 basis point hike, while little change is expected from the ultra dovish BOJ.
Markets are expecting a large 75 basis point interest rate hike at the US Federal Reserve’s meeting next week, away from a flirtation with the chance of an enormous 100 basis point rise.
Oil, also struggling to find a clear direction, rose slightly after gaining 5% overnight. Brent crude was flat at $105.84 a barrel, while US crude was up 0.2% lower at $102.576.
Key figures
Tokyo – Nikkei 225 > UP 0.65% at 26,961.68 (close)
Hong Kong – Hang Seng Index < DOWN 0.9% at 20,661.06 (close)
Shanghai – Composite > UP 0.04% at 3,279.43 (close)
New York – Dow < DOWN 0.7% at 31,072.61 (Monday close)
- Reuters with additional editing by Sean O’Meara
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