Asian stocks were sent in different directions on Tuesday, with investors unsure which way to jump on China’s stuttering economy and uncertain about the likely impact of Beijing’s latest support measures.
Some traders also took a breather ahead of US inflation data that could influence when or if the Federal Reserve raises rates further but most eyes were firmly fixed on China, looking for more clues on its recovery and policy measures.
Chinese stocks fell into the red, even after recent data showed some signs of stabilisation in the world’s second-largest economy.
Data on Monday showed new bank lending in China nearly quadrupled in August from July, beating expectations. And on Saturday, data showed easing deflation pressures amid signs of stabilisation in the economy.
But Ting Lu, chief China economist at Nomura, said the economy still might have to face new headwinds and has yet to stabilise, and Beijing may need to introduce even more aggressive easing measures to ensure a real recovery.
The Shanghai Composite Index fell 0.18%, or 5.72 points, to 3,137.06, while the Shenzhen Composite Index on China’s second exchange edged back 0.08%, or 1.64 points, to 1,951.27.
Meanwhile, China’s largest private property developer Country Garden jumped nearly 5%, after sources said the developer has won approval from its creditors to extend the repayments on six onshore bonds by three years.
The Hang Seng Index dropped 0.39%, or 70.56 points, to 18,025.89, while the Hang Seng China Enterprises Index slipped 0.61%.
Japanese shares ended nearly 1% higher, with automakers leading the gains, as the yen’s retreat from a one-week high lifted exporter stocks and risk appetite.
The Nikkei index rose 0.95% to close near a session high of 32,776.37. The broader Topix ended 0.82% higher at 2,379.91.
The Japanese yen and equities typically move in opposite directions, since a stronger currency hurts exporters’ competitiveness and also makes stocks more expensive for foreigners.
The yen strengthened and the Japanese government bond yields hit multi-month high on Monday after Bank of Japan Governor Kazuo Ueda signalled the end of the negative rate policy in an interview with a local newspaper.
Odds Shorten on US Inflation Fall
Elsewhere across the region, in early trade, Taipei and Manila edged up but Seoul, Sydney, Singapore, Mumbai, Wellington and Jakarta were all down. MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.12%.
Due on Wednesday, markets are expecting the US figures to show annualised core inflation falling to 4.3% in August though the headline number is seen ticking up to 3.6%.
“A lower-than-expected print may slow the US dollar’s rise while higher print could potentially un-nerve risk sentiments as it would reinforce market expectations for further rate hikes, and this could fuel dollar strength,” said OCBC strategist Christopher Wong.
Interest-rate futures markets are pricing about a 45% chance of another US rate hike by year’s end.
Investors’ appetite for risk is also to be tested this week when British chip designer Arm Holdings lists in New York with a goal of raising almost $5 billion.
Overnight, the weaker dollar and upgrade on Tesla from analysts at Morgan Stanley helped US stock markets gain. Tesla rose 10% as the S&P 500 rose 0.7%.
In commodity markets, Brent crude futures were steady at $90.96 a barrel. Gold hung on at $1,922 an ounce, while bitcoin was out of favour and dropped below $25,000 for the first time in three months on Monday.
Tokyo – Nikkei 225 > UP 0.95% at 32,776.37 (close)
Hong Kong – Hang Seng Index < DOWN 0.39% at 18,025.89 (close)
Shanghai – Composite < DOWN 0.18% at 3,137.06 (close)
London – FTSE 100 > UP 0.49% at 7,533.26 (0934 BST)
New York – Dow > UP 0.25% at 34,663.72 (Monday close)
- Reuters with additional editing by Sean O’Meara