Asia report: Markets fall on Japan data, China bond yields rise

(Sharecast News) - Asia-Pacific markets broadly declined on Friday, with mainland China leading the losses as investors evaluated mixed economic data from Japan and a policy update from the People's Bank of China. Markets also faced pressure from weak performances across key sectors in the region.

"Asian stocks fell ahead of the US employment data, which is anticipated to influence interest rate forecasts," said TickMill market strategy partner Patrick Munnelly.

"The MSCI Asia index declined for the third consecutive day, with most market equities experiencing losses.

"S&P 500 futures showed slight fluctuations after US stock markets paused on Thursday to observe a national day of mourning for former President Jimmy Carter."

Munnelly noted that treasuries remained steady during Asian trading, following a selloff earlier in the week that pushed 30-year rates to their highest levels since 2023.

"Chinese yields rose after the People's Bank of China announced a temporary halt to its government bond purchases, a surprising move given that the benchmark yield had just hit a new low.

"The offshore yuan saw a slight appreciation against the dollar; the dollar index recorded a modest increase, continuing its three-day upward trend.

"The yen depreciated by 0.1% against the dollar; traders are closely monitoring signs that Japan may intervene to support the yen, with the upcoming US employment report potentially acting as a catalyst for significant currency volatility."

Most markets fall across the region

In Japan, the Nikkei 225 fell 1.05% to close at 39,190.40, while the Topix index dropped 0.8% to 2,714.12.

The declines came as investors reacted to November household spending data, which showed a smaller-than-expected contraction.

Average real household income also rose year-on-year, but market sentiment remained cautious.

Leading laggards on the Tokyo benchmark included Mitsui Mining and Smelting, which tumbled 6.8%, and Fast Retailing, which slid 6.53%.

Chinese markets saw steeper losses, with the Shanghai Composite down 1.33% to 3,168.52 and the Shenzhen Component losing 1.8% to close at 9,795.94.

Losses in Shanghai were led by Xinjiang Youhao Group and Fujian Dongbai Group, both dropping 10.05%.

Investor sentiment was dampened by the People's Bank of China's announcement that it would temporarily halt treasury bond purchases due to a supply shortage.

Hong Kong's Hang Seng Index shed 0.92% to close at 19,064.29, with JD Health and Lenovo Group falling 5.11% and 4.89%, respectively.

In South Korea, the Kospi 100 fell 0.29% to 2,525.74, with significant losses in companies like LF Co, down 6.59%, and Korea Zinc, which declined 5.61%.

In Australia, the S&P/ASX 200 fell 0.42% to 8,294.10.

GQG Partners led losses with a 5.41% drop, followed by Temple & Webster Group, which fell 2.96%.

New Zealand's S&P/NZX 50 also declined 0.37% to close at 12,895.98, with Eroad sliding 6.25%.

Currency movements were relatively subdued, with the dollar last down 0.01% on the yen to trade at JPY 158.12, while it edged up 0.08% against the Aussie to AUD 1.6154, and rose 0.29% on the Kiwi, changing hands at NZD 1.7910.

Oil prices provided some positive momentum, with Brent crude futures last up 2.89% on ICE to $79.14 per barrel, and the NYMEX quote for West Texas Intermediate gaining 2.96% to $76.11.

Japan household spending falls less than expected, PBoC suspends bond purchases

In economic news, Japan's household spending fell for the fourth consecutive month in November, declining 0.4% year-on-year, according to the country's statistics bureau.

It was a smaller drop than the 0.6% decline anticipated by a Reuters poll and an improvement from the 1.3% contraction recorded in October.

Average household expenditure stood at JPY 295,518, while monthly household income rose 0.7% in real terms to JPY 514,409.

The softer decline in spending provided a mixed signal for the Bank of Japan, which was striving to establish what it called a "virtuous cycle" of rising wages and prices to justify a potential rate hike.

Meanwhile, the People's Bank of China announced a temporary suspension of government bond purchases, citing excess demand and insufficient supply.

Benchmark 10-year bond yields had dropped to record lows, driven by expectations of further policy easing and heightened demand for safe-haven assets amid ongoing property sector challenges and weak consumer activity.

The yield on the 10-year government bond stood at 1.642% on Friday morning, down from 1.6028% at Thursday's close, according to LSEG data.

PBoC officials said the central bank would resume purchases depending on market conditions, emphasising its intent to stabilize the bond market.

Reporting by Josh White for Sharecast.com.