Asia report: Most markets rise after surprise RBNZ rate cut

14th Aug 2024 09:29

(Sharecast News) - Asia-Pacific markets mostly gained on Wednesday, following key economic developments including a surprise rate cut from the Reserve Bank of New Zealand.

Investors also digested news that Japan's prime minister was stepping down, alongside a rise in producer prices in the US overnight.

"Following the generally positive signals from Wall Street overnight, Asian markets are mostly up on Wednesday," said TickMill market analyst Patrick Munnelly.

"Data indicating a less significant than anticipated increase in US producer prices reinforced expectations of a 50 basis point interest rate drop by the US Fed in September.

"The Japanese stock market was noticeably higher - index heavyweights and financial stocks are leading the gains across most sectors as the Nikkei continues to rise above the 36,400 handle."

Munnelly said the announcement that Japanese prime minister Fumio Kishida would resign in September, capping a three-year tenure characterised by surging costs and tainted by political scandals, added to a "hectic" news stream across Asia.

"The benchmark Nikkei gave up gains as the currency marginally rose in response to political unpredictability."

Most markets make modest gains on busy regional news day

In Japan, the Nikkei 225 climbed 0.58% to 36,442.43, while the Topix index rose 1.11% to 2,581.90.

The announcement of Prime Minister Fumio Kishida's resignation in September spurred market activity, although business sentiment among Japanese manufacturers declined slightly in August according to the Reuters Tankan survey.

Conversely, Chinese markets fell, with the Shanghai Composite down 0.6% to 2,850.65 and the Shenzhen Component dropping 1.17% to 8,311.00.

Significant losses were seen in companies like Zhejiang Great Shengda Packaging, which fell 9.96%.

Hong Kong's Hang Seng Index decreased by 0.35% to 17,113.36, with notable declines in WuXi Biologics and WuXi AppTec.

South Korean markets saw gains, with the Kospi rising 0.88% to 2,644.50, driven by strong performances in Hanwha Solutions and Doosan Bobcat.

Australia's S&P/ASX 200 edged up 0.31% to 7,850.70, supported by Pro Medicus and Seven Group.

Across the Tasman Sea, the RBNZ's rate cut prompted a rise in the S&P/NZX 50 by 2.06% to 12,572.53.

New Zealand stocks saw notable gains, with KMD Brands up 9.52% and Synlait Milk rising 7.14%.

In currency markets, the dollar was last up 0.18% on the yen to trade at JPY 147.11, while it managed gains of 0.01% against the Aussie to AUD 1.5076, and jumped 1.09% on the Kiwi to change hands at NZD 1.6638.

Oil prices increased modestly, with Brent crude futures last up 0.81% on ICE at $81.34 per barrel, and the NYMEX quote for West Texas Intermediate ahead 0.79% at $78.97.

RBNZ unexpectedly cuts rates, business sentiment dips in Japan

In economic news, the Reserve Bank of New Zealand surprised markets by reducing its official cash rate to 5.25%, contrary to economists' predictions of a steady rate at 5.5%.

The unexpected move reflected a shift in the central bank's approach to managing economic conditions.

In Japan, business sentiment among manufacturers dipped slightly in August, according to the latest Reuters Tankan survey.

The sentiment index for manufacturers fell to +10 from +11 in July, while the non-manufacturers index decreased to +24 from +26.

The decline was attributed to weaker demand from China, and followed the Bank of Japan's decision in July to raise its benchmark interest rates to their highest level since 2008.

South Korea reported a drop in its seasonally-adjusted unemployment rate to 2.5% in July, down from 2.8% the previous month.

That marked the lowest unemployment rate in the country since October 2023.

In political news, Japan's Prime Minister Fumio Kishida announced his resignation effective September.

Kishida revealed that he would not seek reelection as the leader of the Liberal Democratic Party (LDP), expressing his support for the new LDP leadership.

Meanwhile, Australia's stock regulator, the Australian Securities and Investments Commission (ASIC), filed a lawsuit against the Australian Securities Exchange (ASX).

ASIC alleged that the ASX made misleading statements about the progress of its Clearing House Electronic Subregister System (CHESS) replacement project, claiming the ASX falsely represented the project as being on schedule.

Overnight in the United States, the producer price index (PPI) - a key measure of wholesale inflation - rose by 0.1% in July.

The increase was below economists' expectations of a 0.2% gain, suggesting a moderation in inflationary pressures compared to the previous month.

Reporting by Josh White for Sharecast.com.