Asia report: Markets fall, service inflation jumps in Japan

(Sharecast News) - Asia-Pacific markets were in the red by the close of trading on Monday, driven by a notable drop in the Chinese market attributed to a decrease in the performance of property firms. Simultaneously, Japan's service inflation reached a 45-month high, adding to the mixed economic landscape across the region.

Patrick Munnelly, market analyst at TickMill Group, said Asia markets were subdued due to geopolitical headlines dominating newsflow over the weekend.

"There was uncertainty over whether the Israel-Hamas truce would be extended beyond the initial four-day agreement.

"The Nikkei 225 wiped out its opening gains, and participants digested Japanese services PPI, which showed a slight acceleration.

"The Hang Seng and Shanghai Composite declined due to soft Chinese industrial profits and concerns over shadow banking after Chinese authorities opened a probe into struggling shadow bank Zhongzhi."

Munnelly noted that the People's Bank of China's notice to strengthen financial support for private companies did little to spur risk sentiment.

"Overall, a quiet calendar added to the humdrum mood in the markets as the month-end approached."

Equity markets in the red across the Asia-Pacific region

In Japan, the Nikkei 225 index saw a decline of 0.53%, closing at 33,447.67 points, while the Topix index slipped by 0.38% to reach 2,381.76 points.

The declines on Tokyo's benchmark were led by Mitsubishi Heavy Industries, which fell by 5.01%; CyberAgent, down by 3.84%; and Sumitomo Metal Mining, which saw a decrease of 3.78%.

China also saw a downturn, with the Shanghai Composite index declining by 0.3% to reach 3,031.70 points and the Shenzhen Component index dropping by 0.55% to settle at 9,785.57 points.

The decline in Shanghai was marked by notable losses in companies such as Beijing Vantone Real Estate, down by 10%, and Inly Media, which experienced a 9.98% decrease.

In Hong Kong, the Hang Seng Index registered a decrease of 0.2%, closing at 17,525.06 points.

Key decliners in the market included New World Development, which saw a decline of 6.37%, Longfor Properties, down by 4.07%, and Country Garden Services, which experienced a 3.71% decrease.

South Korea's Kospi index showed relative stability, with only a minor decline of 0.04% to reach 2,495.66 points, although there were notable losses for LG Innotek, down by 3.7%, and Celltrion, which saw a 3.1% decrease.

Australia's S&P/ASX 200 index experienced a more substantial decline of 0.76%, closing at 6,987.60 points, led lower by Megaport, which fell by 3.9%, and IGO, down by 3.32%.

New Zealand's S&P/NZX 50 index registered a decline of 0.49%, closing at 11,155.79 points, dragged down by Restaurant Brands New Zealand, which saw a decrease of 3.28%, and Serko, down by 3.19%.

In currency markets, the dollar was last down 0.22% on the yen, trading at JPY 149.11, while it declined 0.13% against the Aussie to AUD 1.5166.

The greenback was also on the back foot against the Kiwi, retreating 0.15% to change hands at NZD 1.6439.

In the oil market, Brent crude futures were last down 0.31% on ICE at $80.33 per barrel, while the NYMEX quote for West Texas Intermediate fell 0.44% to $75.21.

Service inflation jumps in Japan, Chinese industrial profits decline

In economic news, Japan's services inflation rate reached a 45-month high in October, at 2.3%.

That marked a noticeable increase compared to the prior month's revised rate of 2%.

The last time Japan's services inflation rate reached such levels was in January 2020, which also registered at 2.3%.

Last week, headline inflation in Japan climbed to 3.3%, while core inflation, which excludes fresh food prices, settled at 3%.

Meanwhile, government data in China revealed that industrial profits continued to decline in November, albeit at its slowest pace in nearly a year.

Profits at industrial enterprises in the country decreased by 7.8% from January to October compared to last year.

That represented the most gradual decrease since December 2022, notably smaller than the 9% decline in September.

"While China's economic recovery remains fragile, we expect the year-to-date industrial profits should continue to improve for the rest of year," said Kelvin Lam, senior China economist at Pantheon Macroeconomics.

"The bumpy base from last year will play a role in the annual comparison of profits in the fourth quarter.

"The additional issuance of CNY 1trn special treasury bonds for post-disaster reconstruction purposes should sustain growth in infrastructure and manufacturing investment, further supporting the recovery of producer prices and industrial profits."

Lam said upcoming property measures should help stabilise sentiments in the real estate market and thus demand for new and existing housing, driving demand for construction materials.

"Business sentiment and manufacturing demand should continue to stabilise as profits improve despite challenging external conditions, thanks to a steadier outlook on the back of fiscal stimulus."

Reporting by Josh White for Sharecast.com.