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Asia report: Markets mixed as Japan manufacturing growth slips

By Josh White

Date: Wednesday 23 Jun 2021

Asia report: Markets mixed as Japan manufacturing growth slips

(Sharecast News) - Markets in Asia closed in a mixed state on Wednesday, as investors pored over the latest minutes from the Bank of Japan's policymakers.
In Japan, the Nikkei 225 was down 0.03% at 28,874.89, as the yen weakened 0.22% against the dollar to last trade at JPY 110.89.

Technology conglomerate SoftBank Group was down 0.18%, while among the benchmark's other major components, automation specialist Fanuc was up 0.15% and fashion firm Fast Retailing added 2.05%.

The broader Topix index was off 0.53% by the end of trading in Tokyo, closing at 1,949.14.

Minutes from the Bank of Japan's April policy meeting were released earlier in the session.

They showed members of the central bank agreeing that stimulus measures could result in a quicker-than-anticipated recovery in Japan, with a particular focus on stimulus in developed economies.

On the economic front, the Jibun Bank manufacturing purchasing managers' index fell to 51.5 in June, from 53 in May, although it was still above the 50-point level that separates expansion from contraction.

"The decline was to be expected in the context of China's PMI weakness earlier in the year," said Pantheon Macroeconomics chief Asia economist Freya Beamish.

"The lag is not normally as long, but Japan's survey hadn't realised the lack of foreign support until now.

"The good news is that China's PMIs have since recovered some ground."

Beamish noted that the output subindex dropped below 50, though said that was not particularly surprising in the context of inventory build-up through the first quarter.

"At the same time, it suggests that manufacturers in Japan are facing the same problems obtaining parts as elsewhere, as panel members highlighted.

"The new orders and new export orders indices remained above 50, though did tick down."

Going forward, Beamish said pressure on the sector should ease, as inventory was cleared and logistical problems sorted out, though that would take time for some subsectors.

"We are more worried about the broader shift from manufacturing to services."

On the mainland, the Shanghai Composite managed gains of 0.25% to 3,566.22, and the smaller, technology-heavy Shenzhen Composite added 0.79% to 2,427.38.

South Korea's Kospi rose 0.38% to 3,276.19, while the Hang Seng Index in Hong Kong jumped 1.79% to 28,817.07.

The blue-chip technology stocks were in positive territory in Seoul, with Samsung Electronics up 0.13% and SK Hynix ahead 1.64%.

CMC Markets chief market analyst Michael Hewson said the relative positivity in recent days had been aided by dovish commentary from New York Fed president John Williams.

"His stance on tapering and rate rises stands in contrast to the more hawkish tone of his St Louis Fed counterpart James Bullard, and helped the Nasdaq make a new record high, while the S&P 500 was back within touching distance of its own record high, set last week," Hewson said.

"We've heard a lot about inflation risks over the course of the past few days and it is certainly true that there are concerns about how transitory it might be, but yesterday's comments from Williams show that the Fed also has concerns about the labour market and the lack of a rebound in the participation rate, despite record vacancy rates."

Hewson said that if Williams was concerned about that, he was unlikely the only one, suggesting that while Bullard may want to taper early, he would have to convince a number of others in addition to Robert Kaplan of the Dallas Fed to get his wish.

"Given the current mood music from other Fed members, that doesn't look likely."

Oil prices were higher at the end of the Asian day, with Brent crude last up 1.04% at $75.59 per barrel, and West Texas Intermediate rising 0.93% to $73.53.

In Australia, the S&P/ASX 200 was down 0.6% at 7,298.50, while across the Tasman Sea, New Zealand's S&P/NZX 50 advanced 0.41% to 12,586.49.

Both of the down under dollars were stronger on the greenback, with the Aussie last ahead 0.16% at AUD 1.3217, and the Kiwi advancing 0.25% to NZD 1.4201.

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