Asia report: Markets mixed as Japan manufacturing sentiment improves

(Sharecast News) - Markets in the Asia-Pacific region showed mixed performances on Wednesday as investors assessed softer-than-expected US inflation data and the latest business sentiment survey from Japan. The US producer price index (PPI) for December rose 0.2%, below the 0.4% expected by economists.

Core PPI remained flat, reinforcing views that inflationary pressures are easing.

"Iron ore futures continued to rise on Wednesday, supported by China's stronger-than-anticipated credit data, although concerns over increasing trade tensions as US president-elect Donald Trump prepares to take office next week limited the gains," said Patrick Munnelly, market strategy partner at TickMill.

"Trump has promised to implement a 60% tariff on products from China.

"At first glance, China's December credit data appeared strong, exceeding Bloomberg survey expectations, with year-to-date total social financing reaching CNY 32.226trn compared to the median forecast of CNY 31.56trn."

However, Munnelly noted that a closer look highlighted important nuances - on a monthly basis, credit flow stood at CNY 2.585trn, up from CNY 1.932trn during the same period in 2023.

"This increase was largely driven by a surge in local government bond issuance, which accounted for two-thirds of the monthly total.

"The rise was motivated by efforts to meet year-end growth targets, bolstered by refinancing measures for local government financing vehicles.

"Meanwhile, demand from the private sector remains weak despite lower interest rates and attempts to expand credit access."

Markets finish mixed across the region

In Japan, the Nikkei 225 fell marginally by 0.08% to close at 38,444.58, while the broader Topix gained 0.31% to 2,690.81.

Declines in key stocks such as Furukawa Electric, down 4.3%, and Advantest Corporation, off 3.54%, weighed on the Nikkei.

China's markets were weaker, with the Shanghai Composite down 0.43% at 3,227.12 and the Shenzhen Component dropping 1.03% to 10,060.13.

Losses were driven by significant declines in Harbin Air Conditioning and Shandong Cynda Chemical, both down by the daily limit of 10%.

In Hong Kong, the Hang Seng Index bucked the trend, rising 0.34% to 19,286.07.

Gains were led by Semiconductor Manufacturing International Corporation (SMIC), which surged 5.98%, along with strong performances by Xinyi Solar and NetEase.

South Korea's Kospi 100 eked out a 0.06% gain to 2,495.75.

Shares of Samsung Heavy Industries soared 9.7% to a near nine-year high, amid optimism tied to potential Donald Trump-led US policy shifts favouring oil and gas exports, which could benefit shipbuilders.

HMM Co and Hanwha Ocean also saw strong gains, rising 6.39% and 6.36%, respectively.

Australia's S&P/ASX 200 fell 0.22% to 8,213.30, with declines in tech stocks such as Wisetech Global, down 3.69%, and HUB24, off 3.44%, dragging the index lower.

New Zealand's S&P/NZX 50, however, climbed 0.46% to 12,943.57, buoyed by gains of 3.77% in Sky Network Television and 3.54% in Tourism Holdings.

In currency markets reflected broader uncertainty, the dollar was last down 0.73% on the yen to trade at JPY 156.80, while it slipped 0.2% against the Aussie to AUD 1.6111, and retreated 0.2% from the Kiwi, changing hands at NZD 1.7808.

Oil prices saw modest gains, with Brent crude futures last up 0.19% on ICE to $80.07 per barrel, and the NYMEX quote for West Texas Intermediate up 0.23% to $77.68.

Manufacturer sentiment shows signs of recovery in Japan

In economic news, Japanese manufacturers' sentiment showed signs of recovery in January, rebounding to a reading of +2 from December's -1, according to the Reuters Tankan survey.

That improvement, driven by stronger conditions in upstream industries such as steel and chemicals, aligned with the Bank of Japan's view that wage-driven growth could stabilise inflation near its 2% target.

Despite the recovery, manufacturers' three-month outlook remained flat, with confidence still tempered by uncertainty over potential US policy changes under the Trump administration.

The survey highlighted weaker sentiment in machinery sectors, including autos and electronics, reflecting uneven recovery across industries.

BoJ governor Kazuo Ueda reiterated that the timing of a potential interest rate hike would depend on continued economic and price improvements.

Ueda emphasized that Japan's wage negotiations and US economic policy could significantly influence the central bank's decision, with rate discussions set for the upcoming policy meeting on 23 and 24 January.

Deputy governor Ryozo Himino had also signaled readiness to consider tightening monetary policy.

South Korea, meanwhile, reported a seasonally adjusted unemployment rate of 3.7% in December - the highest in three years.

The number of unemployed surged by 171,000, or 18.1% year-on-year, reaching 1.12 million.

While the country's economically active population rose 0.4% to 29.16 million, the sharp increase in unemployment underscored challenges in the labour market as South Korea navigates a slowing global economy.

In Indonesia, the trade surplus narrowed to a five-month low of $2.24bn in December.

Imports rose sharply by 11.07% year-on-year to $21.22bn, outpacing economists' expectations of a 4.84% increase.

Exports grew 4.78% to $23.46bn, falling short of the 7.38% forecast.

Reporting by Josh White for Sharecast.com.