Asia markets mixed as traders digest central bank decisions, China data

Asia markets were mixed on Thursday, as traders digested another round of Chinese data, as well as interest rate decisions from central banks in New Zealand and South Korea.

The Japanese Nikkei 225 closed up 210.15 points, or 1.26 percent, at 16,852.35. South Korea's Kospi added 16.38 points, or 0.84 percent, to 1,969.33, while Down Under, the S&P/ASX 200 finished 7.11 points, or 0.14 percent, lower at 5,150.07. Hong Kong's Hang Seng index finished near flat at 19,984.42.

Chinese markets slipped, with the Shanghai composite dropping 58.20 points, or 2.03 percent, to 2,804.35. The smaller Shenzhen composite was lower by 24.47 points, or 1.42 percent, to 1,688.97.

Government data released earlier in the day showed consumer prices in the mainland accelerated to a six-month high in February, as seasonal distortions caused food prices to spike.

Consumer price inflation rose 2.3 percent from a year earlier, faster than January's 1.8 percent rise and well above Reuters' expectations for a 1.9 percent rise. February's expansion was the fastest annual pace of growth since July 2014, Reuters said.

Tomohiro Ohsumi | Bloomberg | Getty Images

Julia Wang, greater China economist at HSBC, wrote in a note that such a sharp surge in food prices had been quite rare in recent years.

Wang added in absolute terms, prices of many food items are at their highest points since China's National Bureau of Statistics started collecting data in 2009. She said it may take around two months for "prices to completely normalize."

"Better supply side management may mean prices ease faster, but it appears likely that the year-on-year headline CPI [consumer price index] inflation would remain strong in March," said Wang.

Stronger inflation usually makes it harder for central banks to intervene through stimulus to prop up the economy.

However, Wang said higher inflation reading will be unlikely to reduce room for further monetary easing from the People's Bank of China (PBOC).

"Against the backdrop of sluggish economic activities, we think the PBOC will likely persist with an accommodative monetary policy in order to support growth," she said.

Staying with central banks, the Reserve Bank of New Zealand (RBNZ) surprised markets this morning with an interest rate cut. The central bank reduced its official cash rate by 25 basis points to 2.25 percent. New Zealand's benchmark index closed up 0.79 percent at 6,508.28.

A majority of the economists polled by Reuters expected the bank to stand pat on rates.

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NIKKEI
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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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In a statement, the RBNZ said the global growth outlook had deteriorated since its December monetary policy statement, due to weaker growth in China, other emerging markets and Europe. Drops in prices for fuel and other imports were keeping headline inflation low, the bank added.

Evan Lucas, a market strategist at IG, wrote in a note that following the surprise rate cut this morning, "the market will clearly start pricing in at least one more 25 bps cut and possibly two. Rates could be sub-2 percent in December."

Immediately after the decision the New Zealand dollar tumbled more than a cent against the greenback to just over $0.66, from $0.68 before the decision was announced. Since then, the pair was lower by 0.38 percent to 0.6626 as of 12:27 p.m. HK/SIN time.

In South Korea, the central bank kept interest rates unchanged for a ninth straight month, in line with market expectations. The Bank of Korea held its base rate at 1.5 percent.

The Korean won strengthened against the dollar in afternoon trade, with the pair trading lower by 0.71 percent at 1,199.94 in the afternoon.

On the currency front, the Japanese yen retreated against the dollar, with the dollar/yen pair climbing over the 113 handle. As of 4:15 p.m. HK/SIN time, the pair traded up 0.19 percent at 113.52.

Major Japanese exporters closed mostly up, with shares of Toyota higher by 2.98 percent, Nissan advancing 2.14 percent and Honda up by 1.61 percent. A weaker yen is usually a positive for exporters as it increases their overseas profits when converted into local currency.

The Chinese yuan was near flat against the dollar at 6.5144 in the afternoon local time. Prior to the market open, the PBOC set the yuan mid-point fix at 6.5127 compared to Wednesday's fix of 6.5106.

In corporate news, Japan's Nikkei newspaper reported Wednesday evening that Taiwan's Hon Hai Precision Industry, better known as Foxconn, was now conducting a thorough financial assessment of troubled electronics maker Sharp. The Nikkei said Foxconn's goal is to complete the acquisition of Sharp before the latter's bank loans expire at the end of March.

Nikkei said Sharp has about 500 billion yen in loans from its two main creditors, Mizuho Financial Group and Mitsubishi UFJ that are due to expire on March 31.

Sharp shares closed down 2.5 percent, while Foxconn shares were up 0.24 percent.

U.S. crude futures were down 0.44 percent at $38.12 as of 2:42 p.m. HK/SIN time, after settling up 4.9 percent overnight. Global benchmark Brent was lower by 0.68 percent at $40.79, after it settled up about 4 percent at $41.07 a barrel during U.S hours.

Reuters reported overnight that the U.S. Energy Information Administration said crude stockpiles rose 3.9 million barrels last week to reach nearly 522 million barrels. However, gasoline inventories fell 4.5 million barrels.

Energy plays in the region were mixed, with Santos adding 1.06 percent, Woodside Petroleum lower by 0.56 percent, Inpex gaining 1.91 percent and Japan Petroleum up 1.45 percent. Chinese mainland oil plays were broadly lower, with Sinopec losing 2.42 percent and PetroChina down 1.67 percent.

Major U.S. indexes closed higher overnight, with the Dow Jones industrial average up 0.21 percent, the S&P 500 higher by 0.51 percent and the Nasdaq composite up 0.55 percent.

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