Asia Markets wrap

China’s strong manufacturing data lifted Asian markets after a muted start on the back of downbeat Japanese data and a weak session on Wall Street. Australian stocks under-performed, with the broad market weighed down by the central bank’s silence on additional stimulus.

The Reserve Bank of Australia kept interest rates unchanged, as expected, but did not indicate that additional stimulus is forthcoming as many had expected and acknowledged also that the further tightening of restrictions in Victoria meant that the road to recovery will be both “uneven and bumpy”. 

Australia’s S&P ASX 200 benchmark fell 1.41% and the Australian dollar struck a two-year high, dealing a blow to exporters, who generate nearly a quarter of the country’s GDP.

China’s CSI benchmark was up 0.2%, and both Hong Kong’s Hang Seng benchmark and Japan’s Nikkei index were flat after falling to lows earlier in the day.

China’s Caixin and IHS Markit survey showed a sustained recovery as the world’s second largest economy reported a new order increase for the first time this year, boding well for the labour market.

“This indicates that after a period of drought caused by the coronavirus lockdown, foreign demand is starting to pick up as economies across the globe reawaken from their lockdown slumber,” Fiona Cincotta, a market analyst at data provider City Index, said.

“The employment gauge in the report showed that some companies were starting to increase recruitment to meet production needs, although the gauge remains in negative territory.”

Trade had started on a sombre note after Wall Street’s tepid finish on account of the month end. Overnight, the Dow Jones Industrial Average fell 0.79%, the S&P 500 lost 0.23%, although the Nasdaq Composite added 0.68%. 

Markets were also weighed under by Japan’s unemployment rate which edged higher in July. The labour force rose 0.23% in July, while employment rose 0.17% m/m, implying that unemployment rate rose from 2.8% to 2.9% in July.

“We expect the unemployment rate to hit 4% later in the year as the labour force continues to recover faster than employment,” Tom Learmouth, Japan Economist at Capital Economics, said.

Asian credit markets were firm as investors are piling into corporate debt to get additional yield. The Asia IG index is a basis point tighter at 60/61. BOSC’s SBLC and Keepwell supported bondsBeijing Infra’s 3-year dollar bond and ICBC’s two-tranche deal are also in the market.

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This report appeared first on Asia Times Financial.

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