Asia markets trade mixed as China inflation data miss expectations
Asia markets traded mixed Thursday afternoon following lower-than-expected Chinese inflation data while investors digested the conclusion of a three-day trade negotiation between the U.S. and China.
Mainland Chinese markets, watched by investors in relation to Beijing’s ongoing trade war with Washington, reversed their earlier losses to see gains by the morning session’s end. The Shanghai composite rose 0.23 percent and the Shenzhen composite advanced 0.478 percent. The Shenzhen component also gained 0.528 percent.
Hong Kong’s Hang Seng index also gained 0.37 percent, with shares of Chinese tech giant Tencent gaining 0.31 percent.
The moves came after official Chinese inflation data for December, released at the same time as the market open, came in below expectations.
China’s December consumer inflation (CPI) — a gauge of prices for goods and services — rose 1.9 percent on year. That was lower than economists’ expectations of a 2.1 percent growth, according to a Reuters’ poll. Producer inflation rose 0.9 percent on-year in December, which was lower than the 1.6 percent economists were expecting.
The latest inflation figures came on the back of poorer-than-expected Chinese manufacturing data for December.
Economic data from the world’s second-largest economy has been closely watched by investors for signs of damage inflicted by the trade war between Beijing and Washington. To stimulate a slowing economy, the Chinese government has taken measures such as reducing the reserves required to be held by banks in the country to encourage lending.
“There is clearly a big slowdown … (in) the Chinese economy and the measures so far are not enough to revive (it). At best, they could stabilize the situation probably in the second half, and we’re still at the beginning of the first quarter,” David Gaud, chief investment officer of Asia at Pictet Wealth Management, told CNBC’s “Street Signs” on Thursday.
“Whatever they do right now, it’s gonna be really tough and the first quarter is going to be challenging,” said Gaud.
Elsewhere in Asia, Japan’s Nikkei 225 slipped 1.17 percent while the Topix index declined 0.83 percent. South Korea’s Kospi recovered from its earlier losses to trade slightly higher as shares of chipmaker SK Hynix jumped more than 2.8 percent.
In Australia, the benchmark ASX 200 shed more than 0.1 percent, with the sectors mixed. The heavily-weighted financial subindex slipped 0.19 percent as shares of Australia’s so-called Big Four banks mostly declined. Westpac was fractionally lower, Commonwealth Bank of Australia declined almost 0.5 percent while National Australia Bank slipped 0.2 percent. Australia and New Zealand Banking Group, on the other hand, gained 0.28 percent.
The latest round of trade negotiations in Beijing concluded on Wednesday after an unscheduled third day of talks. Officials from Washington said in a statement that they will report back to the White House for further guidance on the talks.
In a statement, the office of the U.S. Trade Representative said that officials discussed “needed structural changes in China” on matters such as forced technology transfers, intellectual property protection and cyber theft. Talks also focused on “China’s pledge to purchase a substantial amount of agricultural, energy, manufactured goods, and other products and services from the United States,” the statement said.
The Chinese Commerce Ministry also issued its own statement on Thursday morning, saying that the just-concluded round of trade talks with the U.S. were extensive and established a foundation for the resolution of each others’ concerns. Both parties agreed to maintain close contact, the ministry said.
“Initial signs suggest that there is modest momentum building towards a narrow agreement in coming months, but that US trade hawks are fighting an intense rear-guard action to limit the scope of that agreement and keep the pressure up on Beijing,” analysts at political risk consultancy Eurasia Group wrote in a note.
“If a deal is reached, it will almost certainly remain fragile and there will still be a long road ahead of the removal of US tariffs already imposed,” they said.
Analysts at Singapore’s DBS Group Research also said in a morning note that while the three-day meeting was a first step towards easing tensions on both sides, there are challenges ahead.
“US demands for verification and enforceable targets on intellectual-property rights, transfer of technologies and non-tariff barriers may not be that easily addressed,” the DBS analysts wrote. “This sets up room for volatility in the lead up to the 1st March deadline where negotiations on these issues need to be concluded.”
Late last year, the U.S. and China agreed to a cease-fire in their trade war, holding off on any further tariffs until early March so negotiators could seek a deal.
Overnight on Wall Street, the Dow Jones Industrial Average advanced 91.67 points to close at 23,879.12 — its fourth straight day of gains. The S&P 500 also saw a four day winning streak, rising 0.4 percent to finish its trading day at 2,584.96. The Nasdaq Composite gained 0.87 percent to close at 6,957.08.
Wednesday’s moves came after a summary of the Federal Reserve’s December meeting reiterated comments from the central bank’s chairman from last week about patience regarding monetary policy.
The minutes pointed to a backdrop of low inflation in the U.S., meaning the central bank can “afford to be patient about further policy firming.” They also indicated that some Fed officials think a “relatively limited amount” of rate hikes may be coming.
The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 95.054 after seeing an earlier high around 95.9 in the previous session.
The Japanese yen, widely viewed as a safe-haven currency, traded at 107.88 against the dollar after seeing lows around 108.9 yesterday. The Australian dollar was at $0.7179 after gaining from the $0.714 handle in the previous session.
— Reuters and CNBC’s Fred Imbert and Huileng Tan contributed to this report.