Nikkei surges 7.1%, Topix up 8%; China trim losses

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Japanese shares surged on Monday after last week's sharp sell-off, but Chinese stocks had a slow start, starting in negative territory before retracing some losses after markets re-opened after the week-long Lunar New Year holiday.

The Nikkei 225 retraced losses from Friday to close up 1,069.97 points, or 7.16 percent, at 16,022.58. The smaller Topix surged 95.95 points, or 8.02 percent, to 1,292.23 at market close. The Nikkei had lost as much as 12.88 percent between February 1-12.

In South Korea, the Kospi closed up 26.92 points, or 1.47 percent, at 1,862.20.

Down Under, the S&P/ASX 200 closed up 78.15 points, or 1.64 percent, at 4,843.50. The index was buoyed by gains in the materials sector, which closed up 4.44 percent, and the energy sector, which gained 3.08 percent. Resources producers were mostly up, except gold miners, with the likes of Rio Tinto gaining 4.32 percent and BHP Billiton up 5.90 percent.

Gold stocks in Australia closed down between 0.55 and 13.04 percent, with Alacer Gold losing 2.91 percent. Spot gold was down 1.41 percent at $1,220.26 an ounce.

Chris Weston, chief market strategist at spreadbetter IG, summed up the rally in most major markets in an afternoon note. "Asia has...found its mojo," he wrote. "There is nothing like poor data to get the equity bulls excited."

Weston was referring to Japan's fourth-quarter GDP, which underlined the difficulties faced by Prime Minister Shinzo Abe's campaign to kickstart growth, by coming in at -1.4 percent on-year. At the same time, China reported a surprisingly big miss on its trade data for January, with imports and exports down far further than analysts' forecast.

In China, the Shanghai composite pared losses of more than 2 percent to close down 16.23 points, or 0.59 percent, at 2,747.26, while the smaller Shenzhen composite was flat.

Earlier, analysts said the rally in U.S. and Europe on Friday and comments made by People's Bank of China (PBOC) governor Zhou Xiaochuan on the yuan at the weekend might have a positive impact on trade.

The yuan hit its strongest level against the dollar for 2016 as the dollar-yuan pair traded down 1.22 percent at 6.4911.

Over the weekend, Zhou told Caixin financial magazine that he saw no basis for continuing the depreciation of the yuan, also known as the renminbi. He also dismissed speculation that Beijing would tighten capital controls to stem the surging capital outflows from the mainland.

But the trade data for January showed a far bigger slide than expected by analysts. Exports for the month fell 11.2 percent on year, compared to analyst estimates of a 1.9 percent drop, according to a Reuters poll. Imports tumbled 18.8 percent compared to a market estimate of 0.8 percent drop.

Symbol
Name
Price
 
Change
%Change
NIKKEI
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HSI
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ASX 200
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SHANGHAI
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KOSPI
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CNBC 100
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Banking stocks across the region traded mostly higher, following gains for their counterparts in the U.S. and Europe on Friday.

Australia's so-called Big Four banks - ANZ, Commonwealth Bank of Australia, Westpac and NAB - finished up between 1.32 and 2.98 percent.

Japanese banks, which have sold off sharply since the Bank of Japan's surprise decision to introduce negative interest rates toward the end of January, rallied, with Mitsubishi UFJ closing up 8.65 percent, SMFG gaining 10.37 percent, Mizuho Financial up 8.44 percent and Nomura up 10.84 percent.

Brokerages in South Korea closed up between 3.23 and 13.23 percent, with Samsung Securities up 5.07 percent and Daewoo Securities gaining 5.10 percent.

Japanese stocks rallied across the board, with sentiment getting a fillip after Kozo Yamamoto, a key Abe ally, suggested on Friday that Prime Minister Shinzo Abe needed to hold an emergency economic summit to discuss measures to address a global growth slowdown as well as market turbulence.

Major exporters Toyota, Nissan and Honda gained between 6.71 and 9.56 percent on the back of a stronger dollar-yen pair, which was up 0.65 percent at 113.94. Last week, it fell as low as the 111-mark. A weaker yen is a positive for exporters as this increases their overseas revenue when converted into local currency.

Japan's trading houses, known as "sogo shosha," which supply everything from energy to metals to grains and textiles in the resource-scarce country, all saw sharp rebounds Monday, closing up over 8 percent each. Among the big five, Itochu Corp was up 12.19 percent.

The economy, however, contracted at an annualized rate of 1.4 percent in the quarter from October through December, hurt by weak private consumption and housing, according to official data.

Reuters reported that the preliminary figure for GDP contraction was higher than what the market expected - a Reuters poll had estimated shrinkage of1.2 percent. In the July-September period, Japan's revised GDP numbers showed a 1.3 percent gain.

Gavin Parry, managing director of Parry International Trading, told CNBC's "Squawk Box" it would be interesting to see what the BOJ did policy-wise in light of today's trade data.

"If you look at the GDP deflator, it was actually fairly in line, if not [seeing] a little bit of deceleration," he said. "So that's really the indication of the inflation situation. We get the feeling that [the BOJ] will probably increase their on-market purchases - the ETFs and the J-REITS - come March."

Parry added that while there has been a heavy focus on the introduction of negative interest rates and what that might entail for the economy at large, it was more of a carrot and stick approach by the Japanese central bank.

"To us, [negative deposit rates] is more like a stick. They've done the carrot and it's ongoing, that is the QQE (qualitative quantitative easing) programs," said Parry. The move in deposit rates is a stick because it coincides with the third, more elusive arrow of Abenomics, according to Parry - which is increasing real wages and capital expenditures.

"[BOJ] is trying to deploy capital and get it to work into the economy," through negative interest rates, he said.

Oil prices again came under pressure during Asian hours. U.S. benchmark West Texas Intermediate (WTI) futures were down 0.65 percent at $29.25 a barrel after gaining 12.32 percent on Friday during U.S. hours. Brent was down 0.51 percent at $33.19 a barrel, following a 9.35 percent gain in U.S. trade on Friday. But oil prices still remain depressed and volatile.

Last week, UAE's energy minister said OPEC was willing to cooperate on an output cut, as reported by the Wall Street Journal, and added that cheap oil was forcing supply reductions that would help re-balance the market. In recent weeks, several reports have speculated a possible supply cut from OPEC members, particularly Saudi Arabia, even as U.S. inventories continued to build up.

Energy plays traded mostly higher across the region, with Santos erasing early losses to close up 1.90 percent, Woodside Petroleum gaining 5.40 percent, Japan's Inpex adding 7.62 percent and S-Oil retracing some of the gains of near 1 percent to trade up 0.13 percent.

Hong Kong-listed shares of CNOOC, Petrochina and Sinopec were up between 3.11 and 6.42 percent, while mainland shares of China Oilfield erased losses of over 1.5 percent to close up 0.55 percent.

This follows a higher finish on Wall Street on Friday. The Dow Jones industrial average closed up 313.66 points, or 2 percent, at 15,973.84. The S&P 500 ended up 35.70 points, or 1.95 percent, higher at 1,864.78 and the Nasdaq composite gained 70.67 points, or 1.66 percent, to close at 4,337.51.

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