Asia report: Most markets fall after US inflation report

(Sharecast News) - Asia-Pacific markets finished in a mixed but largely negative state on Friday, largely influenced by the surprising surge in producer prices in the United States overnight. The US Bureau of Labor Statistics revealed that producer prices rose 0.6% in February, surpassing economists' expectations.

Core producer prices, excluding food and energy, also climbed by 0.3%, further contributing to market jitters.

"Most Asian stock markets are experiencing a decline in trading on Friday, in response to the negative signals from Wall Street the previous night," said TickMill market analyst Patrick Munnelly.

"This comes as there are growing worries about the US Fed delaying its first interest rate cut until after June, due to the release of producer price inflation data for February which was higher than expected."

Munnelly noted that the Nikkei 225 retreated amid caution leading up to the Rengo wage announcement.

"Reports had indicated that strong wage hikes could potentially influence the Bank of Japan's policy decisions at next week's crucial meeting, prompting investors to adopt a cautious stance."

Most markets in the red on mixed day for region

In Japan, the Nikkei 225 edged down 0.26% to 38,707.64, while the Topix managed a slight gain of 0.35% to reach 2,670.80.

Leading the declines on Tokyo's benchmark was Tokyo Electron, down 4.86%, followed by Lasertec with a 4.29% fall, and Sumco, which retreated 4.15%.

China's markets showed resilience amidst the global economic uncertainty, with the Shanghai Composite advancing by 0.54% to 3,054.64, and the Shenzhen Composite rising by 0.6% to 9,612.75.

Among the gainers in Shanghai were Fujian Aonong Biological Technology and Dongfeng Automobile, gaining 10.08% and 10.04%, respectively.

Hong Kong's Hang Seng Index experienced a notable downturn, dropping 1.42% to 16,720.89.

WuXi Biologics, WuXi AppTec and Tingyi were among the prominent losers, falling a respective 10.2%, 8.79% and 4.76%.

South Korea's Kospi tumbled 1.91% to 2,666.84, with Hanjinkal sliding 16.64% and Samsung C&T falling 9.78% by the end of trading.

In Australia, the S&P/ASX 200 slipped 0.56% to 7,670.30, with Emerald Resources and Liontown Resources seeing declines of 10.06% and 8.43%, respectively.

Meanwhile, New Zealand's S&P/NZX 50 index saw a modest decrease of 0.35% to 11,766.98, with Synlait Milk down 6.76% and Heartland Group losing 6.11% by the close in Wellington.

In currency markets, the dollar was last up 0.3% on the yen to trade at JPY 148.77, while it increased 0.24% against the Aussie to AUD 1.5231, and advanced 0.59% on the Kiwi to change hands at NZD 1.6408.

On the oil front, Brent crude futures were last down 0.42% on ICE at $85.06 per barrel, while the NYMEX quote for West Texas Intermediate declined 0.44% to $80.90.

PBoC maintains key lending rate as house prices fall

In economic news, the People's Bank of China opted to keep its key lending rate steady for the seventh consecutive month.

The decision involved rolling over maturing medium-term loans, maintaining the interest rate on its one-year medium-term lending facility loans at 2.50%.

That rate had remained unchanged since mid-August.

The PBoC rolled over CNY 387bn (£42.18bn) worth of loans of that tenure, though the amount was lower than the CNY 481b of loans set to expire this month.

As a result, the central bank withdrew a net CNY 94bn from the banking system, marking the first cash withdrawal through the liquidity instrument since November 2022.

"Policymakers will likely not stop until the growth target is within reach, even if we think the Ministry of Finance's implicit GDP deflator estimate of 2.4% this year is a near-impossibility," said Oxford Economics lead economist Louise Loo.

"New rounds of fiscal and quasi-fiscal policy easing should ultimately help to narrow China's output gap this year, lifting core inflation, if only modestly this year.

"That said, with concerns over persistent disinflation remaining top of mind, anchoring rapidly falling inflation expectations through a clearer policy roadmap to reflation would be key.

"The National People's Congress meetings last week have not provided that, in our view."

At the same time, China's housing market faced continued downward pressure in February as home prices continued to slide.

The National Bureau of Statistics reported that on a month-on-month basis, prices of new homes declined by 0.3% in first-tier cities, which include Beijing and Shanghai.

Similarly, sale prices in second-tier cities experienced a 0.3% decrease, albeit a slight improvement from January's 0.4% decline.

Third-tier cities saw a more significant drop, with prices falling by 0.4% compared to January.

Year-on-year comparisons revealed a 1% decrease in new home prices in first-tier cities, up from January's 0.5% decline, although the NBS attributed that to a high base effect.

Prices of new homes in second and third-tier cities saw larger year-on-year declines of 1.1% and 2.7%, respectively.

Reporting by Josh White for Sharecast.com.