Asia report: Stocks mixed as Japan inflation slows

(Sharecast News) - In the Asia-Pacific region on Friday, financial markets turned in a mixed performance as investors analysed crucial economic data emerging from Japan. Japan, the world's third-largest economy, saw an increase in both its core and headline inflation rates during October.

"As Wall Street remains closed for Thanksgiving on Thursday, Asian investors will not have the usual lead-in momentum effect," said SPI Asset Management managing partner Stephen Innes earlier in the session.

"So, with little in the way of US market closing guideposts to drive sentiment, the tone for trading in the region is expected to be set by Friday's release of Japan's core inflation data for October.

"I won't pretend that the Japanese inflation prints will provide an especially compelling reason to shift out of the holiday effect mode.

"Still, at a time of pervasive macro ambiguity, considerable disagreement about where we are in the cycle, and more so for foreign exchange markets amid questions about the Bank of Japan's next move, tier-one Japanese inflation data will hold sway today."

Stocks put in mixed performance across region

In Japan, the Nikkei 225 rose 0.52% to reach 33,625.53, and the Topix index recorded a gain of 0.54%, closing at 2,390.94.

Among the leaders on Tokyo's benchmark were Mitsubishi Heavy Industries, which saw an impressive surge of 6.38%, and Dainippon Screen Manufacturing and Resonac Holdings, with gains of 4.45% and 4.38%, respectively.

Conversely, China's markets experienced a decline, with the Shanghai Composite index falling by 0.68% to settle at 3,040.97 and the Shenzhen Component index dropping by 0.94% to 9,839.52.

Inly Media and Guangdong Sitong Group faced notable losses in Shanghai, plummeting by 10.01% and 10%, respectively.

Hong Kong's Hang Seng Index also displayed a negative performance, decreasing by 1.96% to close at 17,559.42.

Significant companies like Chow Tai Fook Jewellery, Zhongsheng Group, and BYD experienced declines of 10.8%, 6.67%, and 5.54%, respectively.

South Korea's Kospi index witnessed a modest decline of 0.73%, closing at 2,496.63.

Hanwha Ocean and HMM faced big setbacks, with losses of 16.73% and 4.04%, respectively.

On the other hand, Australia's S&P/ASX 200 index showed a slight uptick, rising by 0.17% to reach 7,040.80.

Whitehaven Coal and Origin Energy were among the leaders, with increases of 3.41% and 2.76%, respectively.

New Zealand's S&P/NZX 50 index also recorded a positive movement, rising by 0.21% to 11,211.22.

Wellington's advances were led by Serko and Oceania Healthcare, which saw gains of 5.02% and 4.41%, respectively.

In currency markets, the dollar was last down 0.02% on the yen, trading at JPY 149.53, while it declined 0.13% against the Aussie to AUD 1.5230.

Similarly, the greenback retreated 0.21% on the Kiwi to last change hands at NZD 1.6500.

Regarding oil prices, Brent crude futures were last down 0.06% on ICE at $81.37 per barrel, while the NYMEX quote for West Texas Intermediate was off 0.88% at $76.42.

Consumer price rises slow in Japan, manufacturing sector contracts

In economic news, Japan's core consumer prices saw a modest increase in October, according to government data released on Friday.

The core consumer price index (CPI) edged up 2.9% on a year-on-year basis, falling slightly below the expectations set by a Reuters poll, which had forecast a 3% rise.

Core CPI encompasses various goods but excludes fresh food prices.

When excluding both energy products and fresh food, consumer prices in Japan registered a 4% increase in October compared to the prior year, showing a slight slowdown from the 4.2% growth seen in September.

"The Bank of Japan is unlikely to be moved by the uptick in today's national inflation data, given that the main factors were the reduction of energy subsidies and rising fresh food prices, while tourism-related inflation has failed to spreads to other parts of services inflation," said Duncan Wrigley at Pantheon Macroeconomics.

"Core inflation, excluding food and energy, has been broadly stable at 2.7% in the six months to October."

Wrigley said the BoJ would see underlying inflation as largely cost-push on the back of higher import costs due to the weak yen.

"We expect the Bank to make another tactical tweak to yield curve control in the first quarter of next year.

"But last week's disappointing third-quarter GDP figures and today's poor November flash manufacturing PMI probably will lead the Bank to delay the removal of negative rates until Q2, allowing time for recovery to consolidate, supporting wage increases.

"The market currently expects a rate increase in the first quarter."

Meanwhile, Japan's manufacturing sector continued to face challenges, remaining in contraction territory throughout November, per a private survey.

The au Jibun Bank flash manufacturing purchasing managers' index (PMI) for November stood at 48.1, marking the lowest reading since February and lower than the 48.7 recorded in October.

It also marked the sixth consecutive month of contraction in Japan's factory activity.

The survey indicated that both high demand and new orders were expected to decrease further, with the rate of decline in new orders also continuing to worsen.

Backlog declines reached an eight-month high.

On a brighter note, the flash services PMI for November remained relatively stable at 51.7, just marginally above October's 51.6, primarily driven by a modest but sustained increase in business activity.

A PMI reading below 50 indicates contraction, while above signifies expansion.

"Firms remain confident about the outlook, with the future business expectations index rising 0.6 points to 58.1 in November, though below the long-term average, 62.6," Pantheon's Duncan Wrigley added.

"But the big question is whether the services recovery will spread from tourism to the broader economy.

"We think this will be a slow process, given that real wages are still falling."

Reporting by Josh White for Sharecast.com.