Asia Markets Mixed: China Output Contracts Again, Japan Downgrades Q1 GDP
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Asia Markets Mixed: China Output Contracts Again, Japan Downgrades Q1 GDP

Asia Markets Mixed: China Output Contracts Again, Japan Downgrades Q1 GDP

Shanghai, China – January 1: The sun rises over the Oriental Pearl Tower on New Year’s Day, January 1, 2023, in Shanghai, China. (Photo by VCG/VCG via Getty Images)

Asia-Pacific markets got off to a mixed start to the second half of the year as investors weighed June economic data from China and business confidence data from Japan.

Official China PMI data released over the weekend showed the manufacturing PMI at 49.5, unchanged from May, marking the second month of contraction. However, a private survey, the S&P Caixin PMI, showed a marked improvement, rising to 51.8 in June from 51.7 in May.

On Monday, Japan revised its first-quarter GDP contraction to 2.9% year-on-year, from the 1.8% previously reported. GDP data for the third and fourth quarters of 2023 were also revised down, with the Cabinet Office citing new construction investment data.

Japan’s Nikkei 225 rose 0.26% to a three-month high, while the Topix index rose 0.49%. Confidence among Japan’s big manufacturers improved in the second quarter, with the Bank of Japan’s Tankan survey at +13, up from +11 in the first quarter. Economists had expected it to be +12. Non-manufacturing sentiment came in at +33, in line with market expectations but down from +34 in the previous quarter, marking the first decline in four years.

South Korea’s KOSPI was unchanged, while the Kosdaq small-cap index advanced 0.76%. The country saw its industrial activity expand at the fastest pace since February 2022, with the June manufacturing PMI rising to 52.0 from 51.6.

Mainland China’s CSI 300 index fell slightly, while Australia’s S&P/ASX 200 index fell 0.23%. Hong Kong markets were closed on Monday for a holiday.

In the U.S., all three major indices fell overnight. Inflation slowed to its lowest annual rate in more than three years in May, with the personal consumption expenditure (PCE) price index rising just 0.1% last month and 2.6% year over year, in line with Dow Jones estimates. Core PCE, the Federal Reserve’s preferred measure of inflation excluding food and energy, was unchanged for the month and up 2.6% year over year.

“From a market perspective, today’s PCE report was almost perfect,” said David Donabedian, chief investment officer at CIBC Private Wealth US. “It was unequivocally a positive report.”

The S&P 500 fell 0.41%, the Nasdaq Composite fell 0.71% and the Dow Jones Industrial Average fell 0.12%. Both the S&P 500 and the Nasdaq hit new all-time intraday highs early in the session before retreating.