Asia report: Markets mixed on Iran concerns, flurry of regional data

(Sharecast News) - Asia-Pacific markets broadly declined on Thursday as renewed concerns over the Iran war and its impact on energy supplies weighed on sentiment, even as South Korea's Kospi recorded its strongest monthly gain in 28 years on optimism around technology stocks.

"Powell's swan song came with a distinctly hawkish sting," said Patrick Munnelly, market strategy partner at TickMill.

"Although the Federal Reserve left interest rates unchanged, the decision exposed the deepest policy split since 1992, as three regional presidents objected to maintaining an 'easing bias' at a time of stubborn inflation and a rapidly intensifying oil shock."

Oil remained elevated after Axios, citing two sources with knowledge of the matter, reported that US Central Command was set to present president Donald Trump with plans for possible military action against Iran.

Trump had earlier reportedly rejected Tehran's proposal to reopen the Strait of Hormuz, signalling that the naval blockade would remain in place until a broader nuclear agreement was reached.

Brent crude futures later slipped 0.45% on ICE to $117.50 a barrel, but remained near its highest levels since Russia's invasion of Ukraine in 2022, while the NYMEX quote for West Texas Intermediate edged up 0.11% to $107.00.

"With Brent crude priced at $125 per barrel, the Strait of Hormuz still blocked, and reports indicating that Trump will be briefed on new military options regarding Iran today, it's challenging for central banks to disregard these shocks," Munnelly said.

"The rates market reacted swiftly.

"Treasury yields surged as traders adjusted their expectations, effectively eliminating the likelihood of rate cuts this year and shifting towards an almost equal chance of a Fed rate hike by April 2027 - a striking turnaround from the pre-war conditions of late February."

Tokyo stocks slump after flurry of data

In Japan, the Nikkei 225 fell 1.06% to 59,284.92, while the broader Topix dropped 1.19% to 3,727.21.

Fujitsu tumbled 13.89%, Oriental Land lost 10.1% and Central Japan Railway declined 7.99%.

Japan's industrial production fell 0.5% month on month in March on a preliminary basis, missing forecasts for a 1.1% rise and extending February's 2.0% decline.

Output rose 2.3% from a year earlier, compared with a previous reading of 0.4%.

The Ministry of Economy, Trade and Industry attributed the monthly fall mainly to weakness in petroleum-based chemicals, with polyethylene output down 27% and polypropylene falling 15%, while gasoline production fell 7.3% and diesel declined 14.3% as Hormuz-linked disruption hit supply chains.

Japan sources about 95% of its crude oil from the Middle East, most of it typically routed through Hormuz, although METI said 1.8 months of inventory for intermediate chemical products had so far kept downstream shipments largely intact.

Manufacturers expected output to fall a further 0.7% in April before rebounding 2.2% in May.

Japan's retail sales meanwhile rose 1.7% year on year in March, beating expectations for a 1.0% increase, while the previous reading was revised up to a 0.1% decline.

On a seasonally adjusted basis, sales rose 1.3% month on month, ahead of forecasts for a 0.6% gain and reversing a previous 2.0% fall.

The country's consumer confidence index fell 1.1 points in April to 32.2, with the overall livelihood index down 1.5 points to 28.2, the employment index slipping 0.2 points to 37.4, and willingness to buy durable goods falling 2.8 points to 23.2.

The income growth indicator was unchanged at 39.8, while 93.6% of respondents expected prices to rise over the next year, up 0.5 percentage points from the previous month.

Chinese equities mixed as factory activity grows

In China, the Shanghai Composite edged up 0.11% to 4,112.16, while the Shenzhen Component slipped 0.09% to 15,107.55.

Tianjin Realty Development Group rose 10.08%, TianYu Eco-Environment gained 10.07%, and Xinjiang Sayram Modern Agriculture added 10.06%.

Chinese factory activity grew more than expected in April.

The official manufacturing purchasing managers' index dipped to 50.3 from 50.4 in March, but beat expectations for 50.1, while the non-manufacturing PMI fell to 49.4 from 50.1.

At the same time, the private RatingDog China general manufacturing PMI rose to 52.2 from 50.8, its strongest reading since December 2020 and ahead of expectations for 51.0.

"Overall, the RatingDog PMI in April further confirmed that China's economy is in the recovery stage," RatingDog founder Yao Yu said.

"However, this recovery may be more limited to the supply side.

"The comprehensive recovery of the economy still requires more growth in downstream consumption and the repair of residents' balance sheets for support."

Hong Kong's Hang Seng Index fell 1.28% to 25,776.53.

BYD dropped 5.36%, Tingyi lost 4.89% and China Hongqiao Group declined 4.67%.

South Korea's Kospi 100 fell 1.45% to 7,618.60 on the day, with Hyundai Steel down 6.99%, Hyundai Glovis losing 4.82% and Hanmi Pharm declining 4.76%.

However, the benchmark Kospi logged its strongest monthly gain since January 1998, rising nearly 31% as optimism around artificial intelligence and chip stocks outweighed Middle East geopolitical concerns.

HSBC last week upgraded South Korea to 'neutral' from 'underweight', saying recent foreign outflows had unwound crowded positioning and reduced downside risks from geopolitical volatility, while growth themes in energy storage, shipbuilding, defence and nuclear power were also supporting the rally.

"Meanwhile, equities seem to be in a different realm altogether," Munnelly said.

"Nasdaq futures rose by 0.4% following robust earnings from major companies, particularly Alphabet, which saw a 7% jump in after-hours trading, supported by Microsoft and Amazon, while only Meta faced criticism over its AI spending.

"In Asia, the AI sector is thriving, with the Kospi poised for a remarkable gain in April and Taiwan set for a 24.5% increase.

"Regardless of geopolitical tensions, the microeconomic landscape appears to be overshadowing broader macroeconomic concerns."

Sydney in the red while Wellington manages gains

Looking down under, Australia's S&P/ASX 200 fell 0.24% to 8,665.80, led lower by Westgold Resources, which dropped 9.32%, Genesis Minerals, down 8.5%, and Orora, which lost 8.42%.

Munnelly said the central bank cycle would remain in focus, adding: "Despite Australia's softer-than-expected CPI figures, rising headline and core inflation are likely to keep the RBA on a tightening trajectory, with markets estimating around a 70% chance of a rate hike on Tuesday."

Across the Tasman Sea, New Zealand's S&P/NZX 50 rose 1.04% to 12,903.31.

Eroad gained 4.32%, Kiwi Property Group rose 3.39% and Genesis Energy added 3.35%.

New Zealand business confidence deteriorated sharply in April, with ANZ's headline index falling to -10.6 from 32.5, while firms' own activity outlook dropped to 19.6 from 39.3.

One-year inflation expectations rose to 3.81% from 3.08%, the highest since February 2024, while cost expectations climbed to 90.4 from 84.7 in net terms, the highest since January 2023.

Three-month cost expectations rose to 4.57% from 2.99%, the highest since May 2023.

Pricing intentions edged down to 57.7 from 60.3, although short-term pricing expectations rose slightly to 2.41% from 2.37%.

ANZ said some activity indicators improved relative to late responses in the previous month, suggesting part of the initial confidence shock had eased, but rising cost pressures and inflation expectations remain a challenge for the Reserve Bank of New Zealand.

Dollar falls against regional peers

In currencies, the dollar was last down 0.65% on the yen to trade at JPY 159.36, as it declined 0.34% against the Aussie to AUD 1.4005, and lost 0.36% on the Kiwi to change hands at NZD 1.7093.

Reporting by Josh White for Sharecast.com.