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Nikkei Flat, Hang Seng Dips on China Deflation, US Inflation

Investors were distracted by factory gate deflation in China while hopes of rate hikes easing in the US were clouded by its debt ceiling standoff

Asian share markets
A man on a bicycle stands in front of an electronic board showing Shanghai stock index, Nikkei share price index and Dow Jones Industrial Average outside a brokerage in Tokyo. Photo: Reuters


Asia’s stock indexes returned a mixed bag of results on Thursday with competing cues pulling investors in different directions, with deflation fears in China, inflation concerns in the US and mixed earnings in Japan all having an impact.

Most Japanese shares fell as traders pulled back after recent gains and took stock of a whole host of corporate earnings reports ahead of a high-profile Group of Seven nations meeting.

The benchmark Nikkei gauge ended almost flat, inching 0.02% to close at 29,126.72. The broader Topix edged down 0.14% to 2,083.09.


Also on AF: Audits of US-Listed Chinese Firms Had Big Deficiencies: PCAOB


Nearly 300 companies reported earnings on Wednesday, followed by about 1,500 more on Thursday and Friday. Meanwhile, G7 leaders and finance officials are meeting in Japan in the coming days, clouded by the potential absence of US President Joe Biden due to stalled negotiations on lifting the debt limit to avert a default.

Hong Kong and Shanghai stocks slipped, as slow consumer inflation and deepening factory gate deflation data suggested an uneven recovery for China and stoked deflation worries.

Separately, sources said China has told its “big four” state-owned banks to reduce the ceiling on interest rates they pay on some deposits, as banks face squeezed margins under the weight of huge inflows of savings and deposits amid rising economic risks.

The Shanghai Composite Index fell 0.29%, or 9.60 points, to 3,309.55, while the Shenzhen Composite Index on China’s second exchange edged up 0.17%, or 3.49 points, to 2,032.77.

The Hang Seng Index dropped 0.09%, or 18.41 points, to 19,743.79, while the Hang Seng China Enterprises Index gained 0.18%.

Elsewhere across the region, Sydney, Seoul, Singapore, Wellington, Taipei, Bangkok and Jakarta also fell in early trade. Manila and Mumbai edged up.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.1%, reversing gains in the morning session.


US Prices Growth Slows

The outlook for Europe looked somewhat more upbeat, however, with pan-region Euro Stoxx 50 futures rising 0.26%, German DAX futures up 0.2% and FTSE futures up 0.17%. US stock futures, the S&P 500 e-minis, were up 0.22%.

A gauge of global stock markets rose and bond yields slid on Wednesday after data showed US consumer prices in April rose at a slightly slower-than-expected pace, raising hopes that the Federal Reserve’s interest rate hiking cycle is close to an end.

The Labor Department’s Consumer Price Index (CPI) rose 4.9% in April from a year ago, compared with expectations of a 5% increase.

The Nasdaq ended Wednesday at its highest intraday level in more than eight months, boosted by the lower-than-expected increase in April inflation and Alphabet Inc’s latest artificial intelligence rollout.

The Nasdaq Composite added 1.04% while the S&P 500 gained 0.45% and the Dow Jones Industrial Average fell 0.09%.

The two-year Treasury yield, which typically moves in step with rate expectations, touched 3.9265% compared with a US close of 3.901%. The yield on benchmark 10-year Treasury notes reached 3.4364% compared with its US close of 3.436% on Wednesday.

The dollar index, which tracks the greenback against a basket of currencies of other major trading partners, edged 0.03% higher to 101.440. The Japanese yen held to gains and was last seen at 134.215. 

Oil prices rose as strong demand for fuel in the US outweighed concerns about the possibility of the world’s biggest oil producer and consumer defaulting on its debt.

US crude ticked up 0.87% to $73.19 a barrel. Brent crude rose to $77.09 per barrel.


Key figures

Tokyo – Nikkei 225 > UP 0.02% at 29,126.72 (close)

Hong Kong – Hang Seng Index < DOWN 0.09% at 19,743.79 (close)

Shanghai – Composite < DOWN 0.29% at 3,309.55 (close)

London – FTSE 100 > UP 0.31% at 7,765.68 (0935 GMT)

New York – Dow < DOWN 0.22% at 33,487.87 (Wednesday close)


  • Reuters with additional editing by Sean O’Meara


Read more:

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US Firms Sound Alarm Bells Over China Recovery Prospects



Sean O'Meara

Sean O'Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.


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