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Asian stocks pressured by weak Chinese data, Fed uncertainty

Published 06/30/2023, 11:34 AM
© Reuters.
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Investing.com -- Most Asian stocks moved in a flat-to-low range on Friday as weak Chinese economic data and growing fears of U.S. interest rate hikes dented sentiment, although Chinese stocks benefited from some bargain buying and stimulus expectations. 

A strong overnight finish on Wall Street lent little support to regional stocks, as data showed that the U.S. economy grew more than initially expected in the first quarter.

But this resilience also played into fears that the Federal Reserve will have more economic headroom to keep raising interest rates, which in turn kept sentiment on edge.

Broader focus is now on upcoming personal consumption expenditures price index data - the Fed’s preferred inflation gauge - for more cues on the path of interest rates. The reading is due later in the day. 

Chinese stocks recover even as business activity slows 

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes rose around 0.5% each. Both indexes hit multi-month lows earlier in June, attracting some bargain buying. 

Gains in China spilled over into Hong Kong’s Hang Seng index, which added 0.2%.

Data on Friday showed that China’s manufacturing sector slowed for a third straight month in June, while growth in non-manufacturing activity eased more than expected.

The readings pointed to more economic pain for the country, as Beijing struggles to shore up a slowing post-COVID economic rebound.

But the weak data also brought up the possibility of more stimulus measures from the government, which could increase local liquidity and support Chinese stock markets.

Concerns over China weighed on other markets exposed to the country. The Taiwan Weighted index shed 0.7%, while Australia’s ASX 200 was flat, with investors also positioning for a potential interest rate hike by the Reserve Bank next week.

Japanese stocks tumble as inflation remains sticky 

Japan’s Nikkei 225 index fell 0.6%, while the TOPIX fell 0.8% as data on Friday showed that inflation in Tokyo rose slightly less than expected in June, but remained well above the Bank of Japan’s target range.

The reading points to continued pressure on the Bank of Japan to eventually tighten policy this year, which could, in turn, dampen the low interest rate appeal of Japanese stocks.

Traders also locked in some profits in Japanese markets, after both the TOPIX and the Nikkei surged to 33-year highs through June. 

Other Asian markets kept to a tight range. South Korea’s KOSPI added 0.2%, while futures for India’s Nifty 50 pointed to a mildly positive open after a holiday on Thursday. 

 

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