Asian markets traded mixed Monday morning, as traders digested the slew of Chinese economic data released at the weekend.
Australia’s ASX 200 was up 0.42 percent, with a 0.3 percent gain in the financials sub-index which accounts for nearly half of the broader index. Some mining stocks came under pressure, with shares of Oz Minerals down 0.72 percent while South32 shed 2.22 percent. Major miners were mixed, with Fortescue up 1.04 percent and Rio Tinto down 0.54 percent.
Angus Nicholson, a market analyst at spreadbetter IG, said relative strength in the dollar, following positive U.S. April retail sales numbers released on Friday, will likely increase challenges for the materials and energy space.
The dollar gained slightly against a basket of currencies, with the dollar index trading at 94.640 early Monday in Asia, compared to the 93 levels it touched on Friday Asia time.
“The strongest increase in retail sales in more than a year drove the U.S. dollar sharply higher against all of the major currencies, but the gains did not last,” said Kathy Lien, managing director of foreign exchange strategy at BK Asset Management. She added that investors quickly “realized that one good release won’t change anyone’s mind about leaving interest rates unchanged in June.”
Some analysts said despite the strong data, performance in the equity market will also drive the U.S. Federal Reserve’s decision on whether to hike interest rates in June or stand pat.
“A weak performance by U.S. equities saw the probability of the Fed Funds rate being 25-points higher by December fall to 60 percent from 64 percent on Thursday,” said Rodrigo Catril, a currency strategist at the National Australia Bank. “The Fed’s reaction function is still more equity dependent than data dependent in the market’s mind, or so it would seem.”
Nicholson added that Asian markets are set up for a difficult start to the week. He warned, “Chinese data released over the weekend provides further evidence that its aggressive first quarter stimulus appears to be leveling off into the second quarter.”
Data released by China’s National Bureau of Statistics showed investment, factory output and retail sales all grew more slowly than expected in April, with factory output cooling to 6 percent growth in April compared to market expectation for a 6.5 percent on-year rise, Reuters reported.
On Monday morning before market open, Bank of Japan (BOJ) data showed Japan’s producer price index for April fell 4.2 percent on-year, compared to a Reuters poll that expected a 3.7 percent on-year decline.
The yen traded at 108.88 against the dollar, compared to its last close at 108.60. The relative weakness, however, was not enough to give exporters a boost. Most major Japanese exporters traded mixed, with shares of Nissan up 0.19 percent, while Sony shares dropped 1.21 percent.
Usually a weaker yen is a positive for export stocks as it boosts their overseas profits when converted into the local currency.
Yen traders will also be watching for Japan’s first quarter gross domestic product numbers due this week. A Reuters’ poll showed that market watchers expect Japan to register 0.2 percent on-year growth for the January through March period.
“Growth is expected to turn positive after a negative quarter and given the market’s focus on the timing of BOJ easing, stronger or weaker growth could have an unusually significant impact on the yen,” said Lien.
Elsewhere, the Australian dollar advanced slightly against the greenback, trading at $0.7272 after last closing at $0.7263. But the Aussie remains well off from the $0.78 level it briefly touched in April.
Energy plays, however, traded mostly lower, with Santos down 1.44 percent, Woodside Petroleum down 0.59 percent and Chinese mainland shares of Sinopec down 1.79 percent. Japan’s Inpex bucked trends to trade up 0.75 percent.