Asian markets failed to find a common thread Wednesday after mixed signals from China’s purchasing managers’ index (PMI) data and better-than-expected Australian economic growth.
Australia’s gross domestic product (GDP) came in well above expectations, rising 3.1 percent on-year in the first quarter, compared with a Reuters poll forecast for 2.8 percent growth.
That sent the Australian dollar surging to as high as $0.7293 from around $0.7230 before the data. The Aussie was fetching $0.7284 at 10:01 a.m. SIN/HK time.
Australia’s stocks trimmed losses, with the S&P/ASX 200 off 0.73 percent after being down as much as 1.34 percent earlier. Most sub-indexes remained in the red. The heavily weighted financial sub-index dropped 1.25 percent, while the energy sector fell 1.54 percent.
“This is remarkable growth for Australia, led by exports, and diminishes the chance for further Reserve Bank of Australia [interest rate] cuts,” trading platform easyMarkets said in a note Wednesday.
The Shanghai Composite was up 0.10 percent after hovering around the flat line. On Tuesday, the index jumped 3.32 percent on Tuesday in the wake of a Goldman Sachs report Tuesday that raised the probability of A-share inclusion in the MSCI indexes to 70 percent from 50 percent previously. The MSCI will announce the results of its Annual Market Classification Review on June 15, which may see the A-share market included in the index.
Some have doubts that a “yes” from MSCI will spur a surge of funds into China’s markets.
“A-shares would probably be dripped into the MSCI Emerging Markets Index in small tranches,” David Rees, senior markets economist at Capital Economics, said in a note Tuesday.
“What’s more, while some investors who track indices such as the MSCI Emerging Markets Index would automatically enter Chinese markets, there might not be a flood of speculative purchasers,” he added, noting that economic growth on the mainland is unlikely to return to its previous “stellar” rates and that credit concerns remain a dark cloud.
The Nikkei 225 shed 0.59 percent, likely weighed by the yen taking a leg higher. The dollar fetched 110.74 yen at 9:36 a.m. SIN/HK, with the dollar-yen currency pair recovering from lows around 110.42 earlier in the session, but still down from levels over 111 on Tuesday.
Around midday, Kyodo News reported that Prime Minister Shinzo Abe had told a meeting of lawmakers from his party that he would delay a sales tax hike which was planned for next year until October 2019. Neither the benchmark index nor the yen moved much on the news, likely because it has been widely expected, with Abe reportedly due to hold a press conference on the issue later in the day.
In South Korea, the Kospi edged down 0.03 percent, likely getting support from a 2.40 percent gain in heavily weighted Samsung Electronics.
Markets didn’t get much impetus in either direction from China PMI data.
The official PMI, which focuses on larger companies, came in at 50.1 for May, steady with April’s level and a tick above a Reuters poll forecast for 50.0. Levels above 50 indicate expansion.
The official non-manufacturing PMI, which measures services, slipped to 53.1in May from April’s 53.5. The services sector now accounts for more than half of China’s GDP.
The Caixin China manufacturing PMI survey, which focuses on small to medium-sized enterprises, fell to 49.2 from 49.4 in April, compared with expectations for 49.3 from a Reuters poll.
“The PMI readings for May were underwhelming. They suggest that activity held up reasonably well last month, but they also offer few signs of improvement,” Julian Evans-Pritchard, a China economist at Capital Economics, said in a note Wednesday.
Traders will be watching for news from the OPEC meeting to be held Thursday in Vienna, but not many will be expecting a deal to cut output.
Reuters reported that UAE Oil Minister Suhail bin Mohammed al-Mazroui said he was happy with the oil market, noting oil prices have risen recently.
Aircraft leasing company BOC Aviation rose 2.6 percent to 43.10 Hong Kong dollars on its trading debut in Hong Kong; that compares with an initial public offering price of HK$42. The IPO of the Bank of China subsidiary raised $1.1 billion and counted sovereign wealth fund CIC and Boeing as investors, according to a Reuters report. BOC Aviation is the world’s fifth-largest aircraft lessor by fleet size and fourth-largest by fleet value, according to its IPO prospectus, Reuters reported.
Shares of Japan’s Softbank bucked the market, rising 2.57 percent after news it planned to sell $7.9 billion worth of U.S.-listed Alibaba shares to improve its leverage ratio, cutting its stake to around 28 percent from around 32 percent.
In Japan, exporters were mostly lower in the wake of a stronger yen, which weighs on overseas earnings when they are translated back into the home currency.
Virgin Australia tacked on 3.33 percent, extending Tuesday’s 7.14 percent jump after it announced that China’s HNA Aviation would buy a 13 percent stake in the Australian airline for A$159 million ($114 million). The Australia-China airline alliance aimed to capitalize on the growing tourism market between the two countries, Reuters reported.
Markets likely found few cues from Wall Street, which closed mixed after disappointing reads on consumer confidence and regional manufacturing.
“U.S. data is incredibly important at the moment as the market is looking for anything that may upset an increasingly expected July rate hike,” IG market analyst Angus Nicholson said. “Investors are looking for major disappointments in U.S. data, and last night did not provide that with most coming largely in-line with what the market was expecting.”
The Dow Jones industrial average closed down 86.09 points, or 0.48 percent, at 17,787.20 points, squeaking out a 0.08 percent gain for the month of May. The S&P 500 closed down 2.11 points, or 0.10 percent, at 2,096.95, totting up a 1.53 percent gain for the month. The Nasdaq composite closed up 14.55 points, or 0.29 percent, at 4,948.05, rising 3.62 percent for the month.
—Evelyn Cheng contributed to this report.
—By CNBC.Com’s Leslie Shaffer; Follow her on Twitter @LeslieShaffer1