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Asia stocks gain on China data, but profit-taking hits Japan

Asia stocks ended mostly higher on Tuesday following a pick up in Chinese consumer inflation, but Japanese shares fell on profit-taking.

China's annual consumer inflation rose 2.5 percent in May, faster than a 1.8 percent rise in April. Producer prices fell 1.4 percent on year, but that was still better than April's 2 percent drop.

"There are two important market signals for the Chinese economy out of this report. The first is from the PPI report: industrial overcapacity is a genuine problem. The second signal is from the CPI report: there is negligible slack in the labor market, reflected in rapidly rising costs of labor-intensive services," said Bill Adams, senior international economist at PNC Financial Services.

Meanwhile, another record-breaking close on the Dow and S&P 500 overnight also helped to lift sentiment, with deal activity from Merck & Co.and Tyson Foods boosting risk appetite.

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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Shanghai up 1%

Shanghai stocks rose to their highest level in over two weeks, led by financials, after the People's Bank of China cut the reserve ratio requirement (RRR) for rural banks on Monday. Agricultural Bank of China and Bank of Communications rose over 1 percent each while ICBC jumped 2 percent.

Those gains overshadowed news that seven firms launched mainland initial public offerings on Tuesday following a four-month hiatus.

In Hong Kong, China Mobile rallied 1 percent after buying an 18 percent in Thai telco True Corp for $881 million. Citic Resources slumped 10 percent after saying that the group may be affected by the metal financing probe at China's Qingdao Port.

Nikkei falls 0.8%

Japan's benchmark Nikkei index ended at a one-week low, just one day after rising to a three-month high on profit-taking. Traders were also awaiting details on the government's corporate tax reform plan after economics minister Akira Amari said he wanted to settle the issue this week.

Sony dipped 0.6 percent despite reports on Monday that it has overtaken Nintendo in game console sales during the fiscal year 2013. Nintendo was flat on the news.

Read MoreJapan earns its first 'tourism surplus' in 44 years

Fast Retailing fell 1.5 percent after announcing will increase prices at its Uniqlo stores by an estimated 5 percent from August.

Kospi gains 1%

South Korea's benchmark Kospi index rallied to a near two-week high, posting its best daily percentage gain in four weeks. Meanwhile, the won traded near Monday's six-year high against the greenback.

Consumer electronic names were among the top gainers, with LG Electronics up 3.6 percent and LG Display climbing over 6 percent. Samsung Electronics ended 2 percent higher.

Emerging markets gain

Indonesia's Jakarta Composite rallied 1.25 percent following the first presidential debate on Monday in which Jakarta governor Joko Widowi appeared to have scored more points than his opponent.

Read MoreWill Indonesia be Asia's new manufacturing hub?

Meanwhile, Indian stocks finished flat after some profit-taking during the day following Monday's record high.

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ASX 0.1% higher

Australian shares started the week higher following Monday's holiday, with the benchmark S&P ASX 200 rising to a one-week high.

Read MoreThe Aussie at parity by year-end?

Retailers fell with Pacific Brands down 9 percent and The Reject Shop sinking 12 percent after both firms warned of full year profit declines.

Wesfarmers fell 1 percent after The Australian newspaper reported it is eyeing a possible bid for AGL Energy for as much as A$9 billion.

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